Complete newbie with absolutely no experience of the Forex market. I was intrigued by a couple of videos I saw about Forex…not because of the money but because of what I see as a part statistical challenge / mind game / knowledge.
Thought I would just write a few first impressions which may make some sense to other newbies or forum lurkers about to start trading.
I started a demo account and basically played around while I was learning the various terms, graphs, etc. I have watched various videos which are great for tips although I did wonder wonder how some of the presenters would do without knowledge of hindsight?
What the top experts keep saying is important. The number one thing in my opinion is to make a plan and stick to it.
Obviously I was not in a position to make a plan as I know absolutely nothing about the Forex market.
My first steps were just to start a few trades without even thinking about which way the market would go. Basically a coin toss…lots of them. I was only interested in seeing ‘what happened’ rather than winning or losing. Questions such as ‘what happens when I press this’ … ‘why does this happen’ … ‘how do I change this’. Really basic stuff but good to watch the graphs and learn without worrying about profit / loss.
Many videos have lots of info on trends, stats, regression lines, ratios etc making what is essentially (for break even) a 50:50 approach quite complex. I want to keep things simple. Too many lines, colours etc just distract from what is happening.
My next step was to start to think about ‘up or down’ … will the graph move up or down based on the previous patterns. Not really interested in the market pair or all the other stuff the videos teach…just really wanted to get a feel for the movement and visual patterns. At this point I started to think about buy or sell. This is where I ironed out a few more silly errors such as clicking buy when I meant to click sell, not setting profit and loss stops, mistyping the lot size, not understanding how leverage really works.
I then compared a ‘stay and watch’ approach versus a ‘set stop and loss and walk away for the day’ approach. It’s definitely a mind game doing this. I find that the set and walk away approach needs more planning and knowledge of the market (which I do not have) whereas the active trading can be over in a few minutes and provides me with greater understanding of patterns of highs and lows etc. Quick returns and, in my opinion, no specialist in-depth knowledge of the market required in order to move the win:loss ratio away from 50:50 into my favour.
Feeling a little more comfortable I created a spreadsheet with starting balance, % profit target, % risk etc, breaking everything down over days and months. My challenge for the first month is to turn $5k into $6k which is a 20% return. I read time and time again in forum posts that 20% is achievable. So, $5k into $6k should be achievable. I also read that 2% risk was a maximum. I have set a 0.5% risk i.e. $25 during month 1 which means lots of smaller trades. 2 trades per day winning $50 over 20 days = $1000 required. Having the higher opening balance allows me to use leverage when I spot better trading patterns.
I have set default buy and sell trades with pre-populated stops to enable quick buy/sell trades without compromising my position. I have found this also helps avoid slippage on quick trades.
Plan commenced on 10th January with $5000. Currently standing at $5912 as at 18th January. 7 days trading (not all day…just at various points when my required patterns emerged). My return in January should be closer to 40% if this trend continues.
My win to loss ratio is currently about 3:1.
Maximum consecutive losses = 3
Maximum consecutive wins = 12
I’ve still made quite a few stupid errors and my profit would have been in excess of $6k if I had not made 2 typo errors when entering lot sizes.
I have a lot to learn and, according to the videos and expert advice, this winning ratio should not continue based on laws of averages. However, sticking to the plan and employing the same method over and over again should, in theory, work.
All of this is on a demo account and I know things will be different on a live account. The main one will be the mindset. Actually winning or losing real money.
For now I am happy spending the next few months learning a little more and making lots more mistakes.
I’ll post how things progress.