Entering into the Forex Fray

For the people who have just been sucked into the forex trading arena, all they can see is the future prospect of money rolling in at an alarming rate, the children going to private schools and holidays to any part of the globe on a quarterly basis. The reality is a little bit more mundane than this; the majority will lose all the money that they have placed in this endeavour, even those that take time to study the subject will find that it is actually quite difficult to enter into profit.

The aim of this website is to try to get people to think seriously about the implications of what they are undertaking. If you want to even approach the remote possibility that you will earn money, you at least have to study the subject area and see the reality of forex trading. This page has been written to simply prepare the mind for the process of becoming a profitable forex trader. Those that rush, fail, 100% of the time.

I would like to suggest that there are 7 steps to becoming a profitable trader:

1. Set up for Trading
You need an account where you also have access to the tools of the trade like good quality graphs and analytical instruments. The temptation at this stage to dip into trading with money is overwhelming. I advise that you don´t, but it can be healthy to have a go with a small amount of money to see what it is like. The only danger is that you actually earn money at this stage. This will probably lead you to lose all of it in the end based upon your new found sense of invincibility. Do yourself a favour, don´t trade at this point.

2. Learn the Basics of Trading This involves understanding the basic setup of the graphical system, including some simple concepts like pips, candles, lines of resistance and support, bull, bear etc.

3. Learn Trading Concepts
This moves one stage further and seeks to ask what the graph is actually communicating. It also involves learning about how analytical instruments can contribute towards understanding the graphs and about risk management.

4. Create/Learn a Trading Strategy
At this stage we come to adopt a method of buying and selling currencies. This can take place either by starting from first principles and formulating a plan, or simply by adopting one of the many other methods that are available on the market. It is important that you learn trading concepts before you adopt someone else´s plan so that you are able to weigh up their proposition and assess it´s worth.

5. Run Through the Historical Graphs
Having found a strategy that has potential, we reach the moment when it has to be tested with what has gone before. Having found a trading method, it is very tempting to rush into trading, but approaching historical graphs with a brutal honesty can save a person a lot of stress and money.

6. Trade with a Small Amount of Money
This stage is especially important for novices. Having found that a particular method works in the historical graphs, it is time to find out if the method works in real time. There still might be weaknesses in the method that could not be seen in the historical graphs and so it is important to test it using some small figure like 50p per pip. The novice also has the problem that they are more emotional than a bride´s mother on the wedding day and so it is essential that the first entry into the trading arena involves only a small amount of money so as to minimize loss and to increase the novice´s ability to remain calm when money is involved.

7. Proper Trading
Having demonstrated that a method works with a small amount of money, the corollary is that it will work with a larger amount of money! Consequently, the method can be used as a profit making endeavour. The jump from trading with a small amount of money to a larger amount can still be emotionally traumatic for a novice and so it may take place in incremental steps.