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 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.