INTRODUCTION
If something is too good to be true, then its probably not true at all. Below are unedited extracts from email messages that hit my inbox in the past few weeks.
Email 1
“Dear trader,
Ever thought you could earn $372, $595 and more daily,
no matter if you’ve never traded before and WITHOUT PAYING ANYTHING AT ALL? Now you can…
Cristine shares her trades in Live Chat during the EU and the US trading sessions every day with her members.
You can copy paste her trades in real time and start profiting as early as today.
Here’s your link to profit making:
………….
If you want to earn consistent safe returns for FREE*
and also learn the art of becoming a long run successful trader,
just click on the link, fill up your email address and get instant access to all the gifts.
Get all you need here”
Email 2
“Hello mapara,
Our Signals continue to surprise for the better and are now at 80% accuracy (during a 6 month period).
Our traders made tremendous profits so far, using our signals while trading with the brokers below…..”
I’m sure most of the people reading this article have encountered such emails before. When over 90% of forex traders lose their money on the market, then why do these people claim such superior performance? If their services will generate so much money, then why so cheap? How come the statistics of those who lose in the market do not improve? These are some of the questions you should ask yourself before responding to some of these offers. Remember there are no shortcuts to success.
Since joining the community I have made a lot of friends and have learned a lot about various cultures. However I have also noticed that a number of my friends have no trading experience and little knowledge despite having a strong passion for forex. This makes them vulnerable fraudsters and tricksters who promise haven on earth. I will highlight important aspects that one has to go through before becoming a forex trader.
Educate yourself
Burn the midnight candle. Knowledge is a vital component of a trader. Nothing comes cheap and the biggest investment as a trader should be on education and not sophisticated systems, indicators or signals. Traders with the big banks have invested heavily in undergraduate and post graduate degrees and professional qualifications such as the Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT) programs. These programs do not come cheap but a lot of resources are sacrificed. Therefore as a trader you should not think a few free downloaded materials from the internet will be sufficient to make you a good trader. As your prepare to become a trader you should put aside a lot of time to read and research about the market dynamics. One should also be ready to pay for some trading courses and seminars. The beauty about such seminars is that they are usually conducted by professional traders who will be able to share some of their experiences. The education should make one competent in all aspects of trading which include fundamental analysis, technical analysis and behavioural finance. This means a trader must be able to interpret the impact and importance of news items on the economic calendar, understand the use and functions of various indicators and technical analysis tools and have knowledge of all psychological aspects that may affect trading and how to master them.
Have a strategy
After acquiring the knowledge the next step will be to craft a strategy. A man who does not plan, plans to fail. The strategy which should be clearly written down should encompass the following things:
- Trading strategy. The entry and exit rules for every trade should be clearly defined. A trader should only use rules that are clearly understood by him and not something that has been copied from another website and not verifiable.
- Risk Reward ratio: The trading strategy should ensure a favorable risk reward ratio at all time. The risk on any particular trade should always be less than or equal to the return anticipated by the trade.
- Risk Management: The trader should have a proper risk management framework. This entails the use of stop losses on all trades, the appropriate use of leverage and the general management of the trading account.
- Trading journal: Always maintain a trading journal. In this journal you will document all the trades that you have made and the reasoning behind the trades. This is the only way one can learn from the previous trading mistakes.
- Keep it simple: Always use indicators and analysis tools that you understand perfectly.
Choose a reputable broker
Not all brokers are the same and not all brokers who advertise on
television channels such as Bloomberg and CNBC are good brokers. Neither
should you pick a broker because they are a shirt sponsor of your
favorite sport team. In choosing your broker you should consider some of
the following things:
- Regulation: The broker should be regulated by a reputable body. The website of the broker should give a physical address of their location, a box number and a couple of phone numbers are not sufficient.
- Trading platforms: The trading platform is important software that is used in forex trading. It allows traders to manage their accounts, trade in the market, carry out technical analysis and receive forex news. A good forex broker should have an efficient trading platform with strong analysis tools and software support. Fast execution speeds are also essential for a good platform. Some platforms will give you countless re-quotes during trading and this is a perfect example of a broker to avoid.
- Customer Service: The forex markets are open throughout the day and night during weekdays. The market never sleeps and therefore the forex brokers providing service to clients should not sleep either. A good broker should be on hand to attend to client request as long as the market is open and the response should be timely. Some of the services such as finance can be available during specific time periods of the day but technical support should always be available. It should also be very easy to contact the customer services department.
- Trading account types : Part of the specific features of the trading account include the spreads or commissions offered, the leverage available, the minimum deposit required to open an account and the minimum lot size in which you can trade. The easy at which you can deposit and withdraw money from your trading account should also be considered.
- Security: Is the broker reliable and safe, does not steal and
cheat. The broker should indicate if he holds segregated accounts for
clients. If your broker is licensed then you can be assured to some
reasonable degree that your investment is safe.
- Reviews by other traders: Check what other traders have to say about the broker on various review sites or the broker’s website.
Demo practice
Demo practice is a essential component for all newbies in forex. My recommended period is between 4 weeks to 8 weeks. Demo trading is very critical and should not be taken lightly.
- Take demo trading seriously. Most traders tend to be reckless on the demo account because they cannot really lose on the account.
- Assess if trading forex will not interfere with your work and other responsibilities.
- Implement your strategy fully.
- Keep track of the progress being made and review the strategy until you are consistently making profits from the strategy.
- Psychologically prepare yourself to trade.
Trade
After the demo practice, you will be ready to begin trading. As a newbie you should not start by depositing huge sums of money. So as you build your portfolio you should be assessing how you are executing your strategy, how you are keeping your emotions in check and how much time you are spending trading. One will never stop learning so a you go along the trading journey amass as much knowledge and experience as you can.
In conclusion I will end with a Warren Buffet quote, “We enjoy the process far more than the proceeds.”
Happy trading everyone
