New Forex Trader? I have a message for you!


My name is Ahmed. I’ve been in the FX market for about 2 years, I’ve came across all pain, fear, and greed in forex along the journey. So I wanted to print out some words for the new traders who are willing to explore the FX market…

In fact, I will give you the conclusion of my experience with forex. I’ve suffered a lot, cried a lot… and also had my happy, lucky moments…

I will try to put what I have learnt in 1…2…3 to make it easy for you, and I hope you will find it useful If you are just starting your FX trading hobby…

(1) Demo trade before you trade LIVE… I’ve fallen into this mistake, I underrated the value of demo trading and went straightforward to live trading… and I lost my account rapidly.
Please, for the sake of your money, demo trade for a long time before you invest real funds in forex. You will ask me… what period is enough? It is not about period, It’s about experiencing the market type, do not get caught collecting hundreds of pips in a trending market…and double or trible your demo within few days. Do not let the market fool you – Sideways action occur, and will occur forever. Make sure that you demo trade all market types. Make sure that you have traded your system / strategy successfully in demo, in both; ranging and trending market… volatile, and low volatility… and choppy markets.
After you experience the forex market in every type, and your demo account is still paying a reasonable ROI… then you might jump to LIVE!

(2) Plan your returns. It is really important to set your goal. How much do you want to earn trading forex? What is a reasonable ROI or return on investment?
If you think that forex is a money doubler, then you are wrong. Be logical, aim for a lower return on investment. The benefits of aiming for low ROI: Easier achieved, less stress, stable, handle losses, reasonable returns.
I will tell you… I consider a monthly ROI between 2-20% is just in the fine range. Money management is more important than trading strategy itself.

Real Life Example
Back… I’ve longed EURUSD on a 2K account… around 1.2800, and I was so arrogant to say EURUSD will shoot up to 1.30, the fundamentals and techniclas were pointing to a surge in EURUSD. So I used a $8 pip and went to sleep…
Guess…what happened? EURUSD dropped to sub 1.24 before rallying to all-time highs… and ofcourse, my account got a margin call. Beautiful!
I was right to claim that EURUSD will shoot up, but… my greed lead my account to ‘zero’.
Can you tell me how many mistakes I made in such example?

a. Didn’t use a stop loss
b. Horrible money management

even trade is right, and you’re so sure! your account is still vulnerable. Please do not get fooled by “Exellent Chart Setup” and risk a higher pip value. Discipline is key here!

(3) Please do not listen to Bloomberg (bla… ) analysts. Do not do my mistake, someone comes on TV and say EURUSD will go to 1.50 next month…then you go to your account and long… then what?? You lost, try again… These guys are right sometimes, but are wrong other times. Do not listen to any commentary unless it agrees with your chart setup.

(4) Choose a fine broker. Choosing a broker can change your entire trading portfolio. There is a bucket shop and there is a good broker. Research the broker you choose first, do not just jump cause they offer you bonus or other stuff. I recommend Oanda after 2-years of trading.

(5) NEWS… new traders, be careful, please be careful. I lost my first $400 deposit trading a couple of news based on predictions… News trading need experiment, and it does not suit all traders. Please avoid trading the news If you are just starting in Forex. and please do not open an article prior to the release saying:

Bloomberg. Analysts expect EURUSD to briefly go below 1.4000 as NonFarm Payrolls are expected to surge for this month… Please do not follow a statement like this and short the pair blindly before news. I made it once, and ended up losing big pips!

(6) Leverage… when you choose your broker, please do not over leverage your account. Minimize your risk, 50:1 - 100:1 is fine leverage, above that is unrealistic, agressive, and does not suit majority of traders.

(7) I assume you are trading LIVE now. Please remember, live trading is different from demo trading … here is a comparison

Demo trading… no emotions
Live trading… emotions, fear of losing and greed of winning more (psychological part)
Demo trading… instant execution…no whipsaws, or lags in buy/sell rates
Live trading… you will experience some delay…you can get another quote… sometimes in your favour…sometimes not

(8) Return on investment… yes I repeat it. Please do not be greedy, If you achieve 1% roi per day that’s very good… here is an example

You have $100 account and 100:1 leverage. You want to earn $1 on this account today. And you already (I assume) have a successful trading system (I assume intra-day trader) If you opened a position worth $5 that will be 5cents a pip, If you earned 20 points thats 5c x 20 = 100cent (ROI achieved). Low risk… now stop trading and wait for other day.

Please convince yourself that any good (above average) trading system can net to you clean 20 points a day, and each point / pip is worth 5 cents only . Think of it this way

No one get rich quick. You cannot double your $100 and If you did, you will lose your doubled account. Babysit the market – If you take $1 only every day that will count up… you might increase the investment, but do not try to increase the risk.

(9) Indicators… Indicators lag big time, after a few years I realize that indicators just paint price movement. But we, traders, call them… RSI, stochastic, etc… actually If you watch price movement with candlesticks and other indicators… they are just tools that looks so beautiful when they catch up in one direction but it is not that easy. Indicators lag. So my advice is learning to define main support/resistance and relying on price action itself rather than indicators.

You can still use RSI, Sto, for divergence or o/b / o/s overbought, oversold… but mainly I do not use indicators any more as confirmation to my entry. Cause they are laggish.

What is price action? That needs another thread. But what happens is candles can actually show to you what traders are doing without the need of RSI. Long term investors use support/resistance on long term charts to enter the market. Some popular MAs act as good price action indicators, trendlines, channels, fibonacci…so better focus on this stuff other than “RSI over 50 long…RSI below 50 short… A pair can simply rally below level 50… so it’s only lagging”

The above advices are purely from my personal real experience, and I lost many accounts doing mistakes above… So I post them in your hands, and I do not want you to repeat my pain.

Once you realize that you have:
A nice broker
Lower risk leverage
Good System
Good Money Management
Sustainable Return on Investment

You will do fine… every day…
If you still have question regarding anything, or something I missed, PM me… I will help you, I will help you to every extent but not with trading systems. This has to be your choice, your decision.

Let me add (10)

(10) When you enter a trade, always look at the broader trend, unless in very rare exceptions that you see. But do not try to speculate positions in a normal market against a trend. Use 4 timeframes for your confirmation, and at least 3 timeframes have to show same direction for the trade to be fine. :slight_smile:

great post and i think you are the one who just wrote the holy grail which means not only a good system need it but there is lot more around that will help you to success in Forex trading and i would just add do not trade with your EGO that will bring you to loss and do not think you will beat the market instead follow it.

have a good one

Indeed! Do not trade with your ego. Also never think that the market is moving against you or moving in your favour. The forex rates are not moving for your own positions, there is big volumes moving the price. This pyschological point also comes to a new forex trader. When he goes short and price starts to rise…and vice versa…

Excellent post. Thanks once again for contributing yet another quality post. :slight_smile:

Thank you topchess, this is really helpful to newbies like me :smiley:

Thanks for the post topchess!

It is great to hear someone’s history with the forex, especially someone who’s been at it for 2 years. It is great that you’ve shared you experience and knowledge with us.

Great advice! Thanks again.

Happy trading!

Great Observation topchess. I just started live trading last week and I can tell you guys that no matter how many times you might read on things NOT to do, you will most likely never truly understand the words being said until you’ve made the mistakes at least once (or more times) your self.Then you will go “Ohhh, now I truly know WHY I shouldn’t overleverage my account, or not be overly aggressive - I LOSE MONEY lol”. Sometimes it’s the most obvious things…

There are a lot of mistakes a beginner can avoid, like ALWAYS using a stoploss for example. There are some mistakes you never rly want to find out what the consequences are and you can prevent those, but then there are the little things beyond the scope of words that you have to learn from and discover on your own.

I keep a journal of the trades I make, and it’s the best thing to do since paper and pencil was invented.

Keep in mind that your mistakes can be learned and not be very costly to your account at the same time, as long as you keep your mistakes small and manageble…your should do fine.

But then again, that just goes for almost any valuble skill you learn in life :slight_smile:

Happy Trading all

ASA Ahmed:

I am a newest Newbie and reading about you experience sets me in the right notch. I almost wanted to start with a live account - I will follow your advice and start on a demo.

Re: Spreads - What are normal values ? Are there hiden buffers in favour of the traders ? Can you comment on Trading Desk ? How do I know if the firm I am dealing with is a Trading Desk and not a Principal (?) ?

Thx Again


wow dude. you do know that this is in 2007 right? Its been four years and things have been very different. For me i am now in the forex part of a major bank and has seen much more things than in 2007.

In Forex you wun noe who your counterparty is. for Oanda, the pip will vary from 0.5 pip to 1 pip for eurusd. Oanda is taking market rate (which comes from multi liquidity providers such as my bank, take the best bid and offer and then add a bit of spread on it) They dun really earn much as i see that the spread is often 0.2 or 0.3. i do pricing , so i know what is the best price.

What Ahmed say is ever so relevant. Its timeless. careful when trading forex. paper trade like mad before you start

Excellent post AHmed, nicely written, points explained with emphasis and depth.

your point about dont trade around the news, I feel into that with the EUR/USD first on the demo I made a profit of 40pips from 300, then I said I coul make more so I went short again but as the NFP came out EUR/USD went up. I’ll tell ou what I made 157euro at 10.15 on Friday morning at the end of trading my equity on account was around 205 with a live loss of -35.

It was a significant loss.

Thanks for the good advice friend and may the good Lord richly bless you and expand your boundaries.

Thank you for sharing your experience. I have traded live stocks with my husband who had problems with stopping out and then the stock would go in the direction he intended, so he listened to someone who said , well just don’t do it till you are winning. WORST ADVICE EVER. AlLWAYS use stop losses is my motto now. Your advice is great. Thank You.

Rarely great and rarely advisable to all traders.
Thanks for sharing this.i think so that a demo account is so necessary for a trader to be succeed to test some strategies or others…,because a demo account help him to learn his business properly, here without using a demo account it is too difficult to success on Forex

Wonderful advice

Great post.

Two minor points would be:

Either the commentary has value or it doesn’t.

If you don’t listen to it when it doesn’t agree with your chart setup then you should also pay no attention to it when it does.

I think these are arguments in favour of trading live. It’s like learning to drive on a computer game then jumping in a car and going for a spin where the consequences are far more real.

These days where you have brokers that let you trade by the unit you can trade with virtually any amount of money so I’m of the camp that thinks starting live with a very small amout is better than demo.

The only thing demo is good for is learning the platform.

I agree with slipp3ryWhippit. " The only thing demo is good for is learning the platform".

In this case I don’t think that one of your biggest mistakes is going straight on real trading instead on demo. It is more like not enough education when you started trading. Don’t get me wrong I just want to say that trading on demo account is the worse advise for beginners. Trading demo can only give you some basics about trading and all the necessary tools. There is nothing else to learn over there, what ever strategy you’ll develop on demo trading is not going to work when you move to live trading because you have nothing to lose, you are trading without emotions and no money are included.

A resurrected thread but still good, after all this while. The only issue is the “demo must”, a demo can be used to learn the ropes and develop a strategy…but nothing beats trading live…no matter how often the broker may say that their demo mirrors their live acc’s…

Hey, like someone else said, the information here is timeless.

Thank you for taking the time to type all this info, very very useful for beginners.
Thanks to you, we already know a few what NOT to dos.