Forex Reality Check

Forex trader wanna-be's often need a reality check! Reality check number one is that you will not become an expert overnight, in weeks or even months - and most likely never! I would however argue that perhaps one could master an apprentice level trading status in as little as "months" if the person had a personal mentor, trading at their side to guide them. Such is not the case for most, and even then it would still take years to master trading, depending on an individual's temperament. But realistically, most should never graduate from a 'demo account'.

One article I found I think said it best, "Forex, it cannot be traded by just anyone, it is a science, an investment science, a special logic of money flow and economic rules, it does not exist by default in everyone’s head."

In other words, it takes time and even then some will still not learn to become a successful trader. Special thanks to the Forex Dark Side for his shared wisdom, which is a great Forex reality check!

Forex Trading Drawdown

Draw-down is experienced by all traders at some time, and if a trader does not apply proper money management strategies and principles while trading, their account will not survive draw-down.

If you're planning on trading the Forex, you will absolutely want to understand the challenges with draw-down and how to reduce your chances of it eroding your account equity. With Forex, most people won't be successful, so for starters you'll want to have a full grasp of draw-down. Best trading tip would be to never progress beyond a demo account.

Stop Forex Trading Losses

If you've been practicing with a Forex demo account, and you've blown numerous demo accounts (like I have - lol), it's time to wise up and identify what you're doing wrong. Based on my own experience, I would bet you're caught up in the adrenaline rush of trading as a whole, and with that comes the desire to try to make big bucks with each trade, which is a volatile trading strategy.

The obvious downside to trading large lots is the fact that when things go the wrong direction, you stand to lose a large amount, risk the chance of a margin call, and your frustrations will get the best of you. I personally think experiencing margin calls within a demo account is a good lesson to learn, because you never want to have a margin call occur when trading with your real money!

The three Forex trading tips I've provided below are written with the assumption that you already understand what constitutes a buy market order, vs a sell market order, which is one of the first lessons you need to perfect. Once you get that down, then these three tips will be beneficial to you. So, in order to stop losing trades, here's some quick tips that I've learned from a demo account - first and foremost - DON'T TRADE WITH REAL MONEY! ONLY PLAY WITH A DEMO ACCOUNT:

1. Open trades in a small number of lots
2. Allow your profits to run long
3. Cut your losses short

If you follow those three quick tips, your trading should improve and you'll experience less frustration. By trading in small lots you will have smaller losses, assuming you allow your profits to run longer. Trading in too large of lots puts you at risk of having all of your available margin tied up, with no room to correct your error when the market goes the wrong direction.

For most, it's best to stick with just using the simulator and not go into real trading. It's not the same as trading stocks or commodities!

If you found those three Forex trading tips to be useful, here's a longer list of Forex trading tips, and an article on how to reverse your Forex losing streaks!

Happy trading with the Forex!

Forex Candlestick Recognition Dictionary

While studying Forex candlestick pattern recognition today, I came across a very good pattern recognition dictionary! It's one of the better ones I've found and I knew sharing it with you would be good, so here is the link to the forex candlestick dictionary. Happy trading! (Note, the dictionary originally linked to is no longer available.)

Forex Trading Failures

Are you wanting to trade currency on the Forex, Foreign Exchange? Did you know that the statistics for those who fail to make a profit trading is around 90%! Say what? Yeah, you heard that right - 90% of those who trade don't make it, because they don't make a profit.

If you're serious about trading, then how can you become one of the 10% who can make a profit? First off, start out with a free demo account, and trade with play money. You'll quickly learn that it's not as easy as it looks to trade, or not as easy as some will try to lead you to believe.

Beyond testing your strategies with a demo account, here's five reasons why 90% of traders fail. If you can learn the reasons why they fail, then you'll dramatically increase your odds of becoming one of the few successful traders. Okay, let's get started.

  • You must know what constitutes a buy versus a sell signal 
  • Stick to your trading methods that you know are successful, and don't deviate from them.
  • In your first year of trading focus on breaking even, because your profits will most likely be little.
  • The majority of the time there isn't a major trend change to follow, which requires patience!
Hope those five quick tips help, and if you would like to continue your trading education, a great place to learn from is ElliottWave.