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Currency Trading For BeginnersI should probably start this short article by saying that almost everyone who attempts to become a successful currency trader loses their money and fails. I don't know exactly what the failure rate for retail traders trying to make it in the currency markets is, but one common statistic that is often thrown around is that 95% of traders fail – I can see no reason to seriously doubt this statistic as my own experience tells me that this is probably pretty close to the mark. I personally would be very surprised if any more than 1 in 10 who attempt to make it in the Forex market succeed in making any money at all, and I would be even more surprised if the number of traders who do very well out of trading is any more than 1 in 100. Nevertheless, despite such overwhelming odds there is no shortage of people who are determined to succeed at trading currency as for the few who persevere and eventually master their trade the rewards can be huge. For beginners who want to be currency traders, I would offer the following advice – Control your greed & never gamble what you can't afford to lose,Currency trading is speculation, buying another currency is never an investment. It is very important to understand the difference between investing and speculating and I often find that beginners have a tendency to confuse the two. Speculation is merely a form of gambling in my opinion, and as every gambler knows, the golden rule is: never gamble what you can't afford to lose. This small piece of advice is every bit as important in the FX market as it is in any other casino, if not more so. Not only is risking what one cannot afford to lose stupid in currency trading it will tend to make the traders trading worse and increase the chance of loss. Greed tends to be the emotion that causes beginner traders to risk too much of their capital on a trade and this emotion promptly turns to fear when the trade has been placed. When traders are under emotional stress the trader's performance will usually decrease, as the saying goes control the greed and the fear will take care of itself. Trading psychology is a very important part of the puzzle in learning how to trade and the most important piece of that part is control of ones greed. Understand that there are different types of markets,Just because one is a great equities or commodities trader does not mean they will necessarily be good at trading currencies. Different types of markets are driven by different things and therefore behave in different ways, just because a trading strategy or system works great on one particular market doesn't mean that it will work well on another. The Forex market (and especially the large currency pairs) tend to be driven by macro-economic fundamentals and therefore tend to trend well. Trend following systems tend to work well on currencies while systems that make use of mean reversion or support and resistance strategies will usually perform badly. Develop a suitable strategy or system first,As I have said in many of the articles on this website, it is essential that a trader develops a system, or at the very least a trading strategy, with a statistical edge. Any system or strategy you develop must be right for you, it must 'fit' with your personality and goals and you must have tested in thoroughly in order to gain the confidence you will need to be able to stick with it through the good times and the bad (which will come sooner or later). The technical trading systems that appear on this website are incomplete and exist to give the reader ideas to develop for themselves. For novices looking for a place to start I would recommend looking at the articles on trading strategies that work, the most important lessons I have learned trading Forex (so far), and the characteristics of the best Forex trading systems. Practice,Use a demo trading account to practice. Most reputable online FX brokers will offer demo accounts where you can practice trading without risking any real money. I would advise that you use them. There is no reason why you need to start trading with real money until you are comfortable trading in a demo account, and if you can't succeed at demo trading then you won't be able to succeed with trading with real money. |
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