Forex Trading for Beginners! 3 Simple Steps for Success!
1. How to Make Money in Forex? Dangerous Myths – Take Off Rose-Colored Glasses!
1.1. About Importance of Education
2. STEP 1! FOREX TRADING – Style Selection, Timeframe and Currency Pairs
3. STEP 2! FOREX TRADING STRATEGIES – How to Make Choice?
3.1. Dangerous Tricks – The Straight Way to Waste the Deposit
4. STEP 3! Start Practicing!
4.2. TOP-10 Mistakes of Novice Traders
4.3. Effortless Forex Trading for Beginners? Forex Advisors - Exposing Myths about Trading!
5. Good Old Forex VS Binary Options
6. Little Conclusion
Internet is full of stories about novice traders who get wealthy for a month, then leave their main job, buy a car and begin living well, spending a couple of hours per day for trading. It’s obvious that such an example attract many people, and the problem of forex trading for beginners is very acute. And realization that everything is not that easy as it may seem comes only after first failures and losses.
How to Make Money in Forex? Dangerous Myths – Take Off Rose-Colored Glasses!
Speculations at the currency market can really become a source of stable and continuous income. Moreover, this income can truly exceed average monthly wages by several times! But for that, you will have to work really hard! Forget about stories how $10 transform into tens of thousands within a couple of minutes. The probability of it is not more than of winning in lottery several times in a row.
There is a range of common myths over trading. The most widespread are:
- Forex trading requires economical education. Absolutely wrong and having nothing about the reality. It may be handy for realizing general trends taking place in economies of countries. But, it won’t help to find the ideal point to enter the market! There are lots of approachable strategies with indicators; besides, technical, wave and candlestick analysis doesn’t require economical knowledge.
- One may start trading and making money from just several bucks! It is truth but you must consider and realize that profits will also be tiny this way. We will talk about profitability further.
- It’s needed to pass training in the Dealing Center! Read many books! This statement is 90% wrong. Surely, basic knowledge about market, its functioning, main terms are needed, but this knowledge can be gotten yourself. The majority of books should be perceived as fiction.
- It is the easy way to get wealthy! Load of rubbish. The process of making the order itself is truly not that difficult – just make two click with your mouth. All the tough point of trading lies in the psychological stress, and most time is spent for the market analysis, development of trading plan, etc.
- Brokers play against traders, preventing the latter from gaining! Probable, in early 2000s, some companies did it this way. But today, there are no cheaters like those. It’s simply unprofitable for dealing centers to spoil their reputations. Especially since most novices can waste their deposits themselves.
- Instead of trading yourself, you can buy an advisor, and the problem of forex trading for beginners will be solved. The bot will make money! Such approach may work for limited time only. With that, there is a great probability that an unfair seller will give a wasting advisor for you.
From all that, you must understand the most significant: trading is the type of working! Maybe, even more complicated than your current. Statistically, about 95% beginners reach nothing in this activity. But it just proves their thoughtless attitude towards such a concept as forex trading! Approaching trading as a casino is the right way to disappointment and wasting your deposit!
Considering mistakes of most traders, we can make a plan or even an instruction for actions while trading. It will reasonably increase the probability of success!
About Importance of Education
Before starting working, I can recommend you to:
- Study the main terms of the market. Such things as StopLoss, TakeProfit, turn, trailing-stop, buy-up must be recognizable for a novice! An approachable encyclopedia for beginner traders will help in it.
- Acquire basic skills of working with MT4 terminal! Besides making orders, you need to be able to set user’s indicators, forex advisors and so on.
- You can read a couple of books dedicated to trading. Most significant and noteworthy are works of Steve Nison, Thomas DeMark, Alexander Elder, Bill Williams, Ralph Vince and several others.
- It may sound strange, but forget about thoughts of getting wealthy soon. The cold head is the main guarantee for success and the answer to the question “how to make money in forex”!
What’s to different educational courses, you should be definitely careful with them. Especially with those that advertise different dealing centers. It often occurs that education transforms into banal examination of the main opportunities of the terminal. Further, there goes the block of theoretical information (psychology, deposit management and so on), and finally, 1-2 simple forex trading strategies are looked into. Sometimes, they open a bonus account with symbolic $10-15.
As a result, a person pays solid amount, getting the same information they could study themselves. There are some exceptions in this rule, but the risk to face a fraud is quite high. If you still have the eagerness to learn this way, you must take the following things into consideration:
- Experience of a trader. Often, those like to teach forex trading for beginners, who didn’t become successful traders. That’s why, I strongly recommend you first read info about the author of the educational course. By the way, you can read about the founder of this portal in the article “The Story of Success”.
- The style of trading. In this issue, everything is individual: some will prefer wave analysis, others – technical analysis, while some will be fond of forex trading strategies that use indicators for operation.
STEP 1! FOREX TRADING – Style Selection, Timeframe and Currency Pairs
Before choosing the trading strategy, you should generally figure how you will actually work. A working timeframe and currency pairs chosen correctly mostly insure the success. I can give a couple of general tips:
- A novice would better forget about timeframes lower than H1 The best way is to start trading at major timeframes (H4-D1). At such time intervals, graphical and candlestick patters work with the highest reliability, and you won’t have to spend much time in front of your display. But, nevertheless, this rule has exceptions!
- What’s to currency pairs, you may choose the most popular ones for your arsenal: EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/USD. It’s enough just to select 1-3 pairs from this list – don’t be dissipated for everything from the beginning!
You should consider that at the first stages trading is a hobby, which may transform into the main activity in future. It means that a one cannot spend the whole day in front of the display physically. And, psychologically it’s too difficult as well. So, I can recommend you to pay attention to trading derivative instruments. You may find more information about them in the article “Step-by-Step Instruction for Trading”. This type of trading doesn’t require too much time, and its principle is by far more comprehensive.
But let’s get back to the issue of how to make money in forex! For trading in the day, you’d better attend in front of the display on time of London Exchange opening (8:00 AM GMT) and of American opening (4:00 PM GMT). Your working schedule should look like that:
- When European exchanges open, look for entrance points;
- Further, conduct opened positions;
- After that, before American exchange opens, set StopLosses and look for the opportunity to make an order;
- Orders may be left open for several hours, but before that, at lest move them to the breakeven.
STEP 2! FOREX TRADING STRATEGIES – How to Make Choice?
Trading without strict and clear rules of entrances, conducting and closing of the position has dangerous ends. At the moment, there are lots of ready trading strategies, so you can easily choose one of them and then start engaging practice. All you need is to be aware of strengths and weaknesses of different types of strategies:
- Using indicators only are good because there is no subjectivity in the analysis of the market - you only need to follow strict rules. But, there is a drawback: their efficiency depends on settings of indicators: the market is changeable, and with the course of time, the set of parameters stops working. So, you have to arrange them manually again, and this process is quite tough and long!
- Based on the technical analysis are profitably distinguished that fundamentals of technical analysis – for instance, bouncing from lines of support/resistance, work at all markets and their efficiency doesn’t fall with time. But with marking the chart, there is the solid part of subjectivity: you may just select various extremums for drawing levels, trend lines, and the picture will be completely different!
- Trading strategies fully based on news, should be used combined with other strategies. That’s because it’s quite difficult to make an exact forecast over price behavior when the important statistics is published.
- Wave analysis is difficult to be mastered, and chart markup is not the simplest activity. But there are simple and efficient trading strategies using some of its elements – for instance, forex trading with Wolf waves.
There is no universal solution or a method over forex trading for beginners. Each mentioned type of trading strategies has its own unique advantages! I can only advise not to run mad after too many indicators: practice shows 2-3 programs are enough for the full-value strategies using indicators.
Dangerous Tricks – The Straight Way to Waste the Deposit
There are several risky tactics, which are dangerous for the deposit, being used by unexperienced traders. At the first stages, avoid:
- Martingale in its every expressions, except averaging positions. The classical Martingale involves the repeated entrance in the market in the same direction (as the first order has), but with the enlarged lot. As a result, we can get a whole network of orders in Forex, and the enormous pressure over the deposit. There are softer variants of Martingale with the dynamic step between orders and nonlinear increasing of the lot. This strategy makes its best efficiency while trading binary options.
- Locking positions. The essence of locking lies in the fact that 2 orders of different directions are made, which gives the opportunity to conserve the loss: while it will grow by the one order, profits will increase by the other. The main difficulty is how to leave this lock with minimal losses. And, to answer it, you definitely need practice!
- Trading without protective orders! Trading without StopLosses is the same this as driving an automobile from the slope without brakes: sooner or later, the driver will lose control (in our case, we talk about suffering great losses).
STEP 3! Start Practicing!
Demo-account is perceived by most people as a great way to test skills and get some practice without any risk to lose money. Sometimes it occurs that traders demonstrate good results while trading with virtual money, but with the moving to real accounts, the picture changes radically. The reason for that lies in psychology.
A novice may be surprised if they will be told that the success of a trade mostly depends on self-control and psychological stability of the person. Working forex trading strategies are also indispensable, but they take the third place at affecting results.
Problems with self-control will make trading unprofitable even if ultraprofitable trading strategy is being used! A trader won’t be capable even to follow its rules! As a result, there comes unscheduled orders, StopLosses and more and more losses suffered.
What’s to trading at the demo-account, this way has by far more disadvantages than it may seem by the first sight:
- Lack of strong emotions of a trader: money is virtual, so a trader cannot feel all the specter of emotions while trading at the demo-account. Correspondingly, there is a great risk to break down when moving to the real account!
- Orders at the demo-account are processed shortly, while it takes some time at the real. But, this is mostly the feature of accounts of different types, having no impact on manual trading. The rapidness of completing orders plays the role only while testing pips-advisors, when even just a couple of pips matter.
So, I can recommend you to start trading with real money from the very beginning, but don’t take risks over great amounts as well. The ideal variant is to use cent-account for practice. With that, 1 cent will be equal to the 1 unit of basic currency, i.e. the deposit of $10 will look like $1,000 in the terminal. With that order of actions, the issue of forex trading for beginners will stop seeming difficult.
Gaining profits must become a routine, without causing any special emotions. Only after that, you may increase your deposit. What concerns profitability, there, everything is individual, but professional traders can make +20-30% a month to the deposit. At the beginning stage, +5-10% is quite good – we are interested in stability first, and profit amounts second. With binary options, the picture is absolutely different. There, 70-80% of the deposit is growth approachable for novices! That’s why, I recommend you master simple strategies designed for option traders. “Bullet” strategy will suit those who love adrenaline buzz, while conservators would prefer the long-term strategy “Secret Advisor”.
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TOP-10 Mistakes of Novice Traders
The way of a beginner trader is full of mistakes, but newbies are never tired of repeating them. There is a lot of sad examples, and we can compose a short list of TOP-10 most common mistakes:
- Trading with the system – guaranteed wasting! Random trading leads to the same end, as throwing a coin: in theory, with a great number of order, the ratio between good and bad orders will approach 50/50. But, we cannot speak of stable incomes at all this way!
- Continual thrashing about searching for better trading strategy. It’s a quite common symptom, which occurs mostly at the beginning stage after the trading was started at the real account. Remember: 2-3 strategies will be quite enough for profitable trading.
- Trading without StopLosses.
- Moving StopLoss when the price approaches it. If the StopLoss is set correctly, and price approached it closely, then the gotten signal is liked to be unprofitable. Moving StopLoss hoping for a turn is a lottery!
- Continual monitoring of the market situation. It’s difficult first from the psychological point of view: a trader sees missed profits in each price movement, which can lead to unreasonable orders.
- Too early fixation of profits as a result of lack of self-confidence. One of traders’ commandments sounds like that: “Let the profit grow, limit losses!” Novices often neglect this rule.
- The desire to win back when suffering losses. In a situation, when one should stop trading and look at the situation soberly, a trader can be eager to win back fast. The result is the increase of the lot, random market entrance and fast wasting of the deposit.
- Too much hope for different services providing trading signals, and running mad after forecasts of different analysts. All that stuff in the head becomes a mess, while uncertainty in actions increases.
- Trading against the trend (countertrend trading) is definitely not a thing to start trading with. It should be left for a professional.
- A trader starts building plans over managing and spending the deposit, so losses make them confused. You’d better forget about withdrawing money from the deposit at the beginning stage, and imagine that money doesn’t belong to you.
Effortless Forex Trading for Beginners? Forex Advisors - Exposing Myths about Trading!
Trading robots don’t have the main human’s disadvantage – emotionality while making decisions. Also, they never get tired or lose concentration. For the first sight, it’s the ideal variant to start with. For most, it seems that purchasing a good advisor is enough to insure the stable income.
Only naïve may think forex advisors will solve all your problems, otherwise it would have turned that all the traders made it this way. Automatic trading has the range of nuances:
- A robot engages trading only according to the algorithm implemented in it – it can’t learn itself (though there are some attempts being carried out to create self-learning trading strategies based on neuro-networks!). And it means that with the course of time, you will have to set parameters again – optimize the robot. And though this process is automatized in the strategy tester of MT4, it will still take much time without guarantees that the positive result will be reached at all!
- Those robots that are free, don’t give stable incomes. So you are guaranteed to get the many-hours doing with optimization! Profitable forex advisors exist, but the majority of them are paid, and their cost fluctuates between $30-50 to $1000 and even more. However, it must be considered that the price and efficiency of a robot are not related! It’s kind of a roulette!
- You’d better trade with an arsenal of several advisors: some trade with high risks, others – with moderate risks. Even if 1-2 start wasting deposit, all that will happen is that the total profit will fall.
- You should know basics of how the advisor really works. It’s needed to get rid of networkers and other bots using too risky tactics.
Actually, it’s possible to trade profitably with advisors. But, this variant, in spite of common opinion, is not for novices! Because it must be clearly realized there is no freebie but hardworking for at least as much as with manual trading. Meanwhile, you may have to pay by far more than with your own trading experience. Besides the money for deposit, you will have some amount for purchasing advisors and payments for VPS-hosting (though this cost item is not that big).
Good Old Forex VS Binary Options
In the problem of forex trading for beginners, potential profit is the most agile issue for a novice trader. Don’t count for the multiple increase in deposit for a week/month, so you need solid funds for serious incomes. In this background, binary options look attractively, which may give profits up to 75-98% per order.
Forex has the only one principle: purchased by lower prices, sold by higher price (or conversely). Meanwhile, binary options can be of various types:
- Touch – a trader selects the level that must be reached by price by the expiration moment (lifetime of the order);
- Range – by the expiration moment, price must lie inside the certain range (corridor);
- Put/Call– asset price must be higher/lower than the level at which the order was made.
Therefore, there is the main difference between binary options and Forex – no compromises: only win or lose! Disadvantages of options are:
- While forex trading, you can partly close the order at any time, move it to the breakeven, activate trailing-stop and so on. With binary options, you have either to prolong the expiration term, or to sell the option, suffering some losses.
- While trading through online-platforms, you cannot use forex advisors for working. But, as we’ve found above, it should be avoided at the first stages.
- By far higher potential profits.
- It’s possible to gain 75-98% of the order’s volume even by the 1-pip movement! If, for example, the purchase of call-option was by the price of 1.14257, and it was just 1.14258 by the moment of expiration, the order will close with profits.
According to the listed features, you may decide yourself what to master first: to master forex, or to try yourself in trading binary options.
The problem of forex trading for beginners remains the most significant issue of novice traders. You must realize at once that it will be impossible to reach success without having invested anything – probably, there will be some losses, and some wasted deposits. The main thing is not to give up and work hard over yourself! Listed tips may help in avoiding most common traps catching the majority of novices. And, therefore, they can save nerves, time and money for you! It’s possible to engage profitable trading – either in Forex, or with binary options. The key for success is in your hands! Just use it!