7 Necessary Steps to Becoming a Profitable Trader
By Paul Tagger
Forex is all the rage these days and everybody and their brother is selling a course, book or signal service that reveals the untold secrets to becoming a top Forex trader and start the new would-be trader on his way to trading riches.
The true fact of the matter is that there really is no secret method in learning to trade. Talk to any trader who has learned to consistently pull pips out of the market and they all tell you the same thing.
“Trading is primarily persistence, discipline and determination”
Most successful trader end up taking similar path when learning to trade the FOREX market. In this article I will discuss the 7 primary steps most good traders follow to trading successfully.
So here we go.
Step 1. -GET A BASIC EDUCATION
Education is where every good would be trader should start. You don’t have to go out right away and spend a bunch of money on some “Learn Forex in a week-end” course. Nor do you have to spend a lot of money on the latest and greatest ebook, at least not yet.
There is a ton of good and FREE resources on the net that gives you the basics of what Forex is all about. What you are trying to do here is learn the basics and try to determine if FOREX trading is really for you.
Make sure that resource you use gives you a balance view of the advantages and disadvantages that come with trading the Forex market. There is a lot of hype surrounding the Forex market.
One of the best free courses I have seen on the net is
Forex Education, Forex Training, Beginner's Guide to Forex Trading - BabyPips.com and
Online Investing For Beginners covers stocks, online trading, paper trading, all in one trading e-book.
Both of these resources will tell you everything you need to know to get started. Once you finish either of these courses you will know if trading Forex is for you.
Step 2 - DECIDE IF FOREX IS FOR YOU
Once you have a general idea of what Forex is and what it can do for you, ask yourself is it truly something you want to do.
If it is, then make the decision right then to do whatever it takes to become a good trader. No excuses, no turning back. Most new trader quit before they really start understanding what trading is all about and begin earning money.
Step 3 - TAP INTO THE FOREX COMMUNITY
In order to get good at trading, you are going to have to hang around other traders. The best way to do that is to go to where they hang out
There are a number of forums and blogs offering a great environment for new traders. These public forums offer plenty of help and you can usually get a lot of your beginning questions answered. These public forums will become your life line and will be an invaluable resource.
Although there are a number of good forums, here are some of the ones I found helpful.
MoneyTec Traders Community Forum
Forex Forum, Forex Calendar, Forex News @ Forex Factory
Forex Trading | MetaTrader Indicators and Expert Advisors - Home
Don't be afraid to ask questions and read as much as you can.
Step 4 - BEGAN TO STUDY A SPECIFIC TRADING SYSTEM
There are a number of profitable trading systems out there. Most likely you were introduced to the Forex market because of someone selling a trading system that looked interesting. You will find a number of them on the public forums and blogs.
Once you pick a system, ask around in the forums about the system in question. Most likely there are a number of people who have used or at least heard of the system you intend on using. Get their opinion.
Caution** Forex trading is a very personal thing. You are always going to find varying opinions on a Forex trading system. What you want to do is get the general consensus. If the majority of people on the forum are saying the same thing, you may want to take notice.
Step 5 - PICK A BROKER AND OPEN A DEMO ACCOUNT
I really don't want to go into what to look for when picking a broker in this article. You can get some good advice from fellow forum members. Also your beginning-trading course most likely made a recommendation or two.
The most import thing you should keep in mind when opening and trading your demo account is that your demo is to give you the hands on experience on how to use your trading platform and to give you an ideal of the basics of trading in the Forex Market.
Trading a demo account only, will not make you a good trader but it is a necessary first step.
The purpose of your demo account will be to familiarize yourself with your trading platform as well as the trading system you plan on using.
I recommend no less than 300 perfectly executed trades utilizing the desired trading system in your demo account.
At this point we don't care if they are winners or losers. What you are doing here is building up discipline. You are also creating a live track record of your trading model. This will give you untold confidence to trade your trading method live when you hit a losing streak.
Step -6 EVALUATE YOUR DEMO PERFORMANCE
After you have done your 300 trades, look back to see how you did.
Did you follow the model exactly?
How did the model perform?
Did your trading method perform as expected?
Step 7 - OPEN A LIVE ACCOUNT.
If you had a positive outcome in your demo account and you feel your trading model is a valid trading model, you are now ready to open a live account.
Here is where the "rubber meets the road" I don't recommend starting a trading account with less than $1,000 of discretionary funds. This should be a mini account where you are trading no more than $1.00 per pip. Think of this first $1,000 as your tuition for learning to trade. You want to make this initial $1,000 last as long as possible.
When first starting out, you are not trying to make a killing in your trading account. You are trying to develop winning trading habits. You will be surprised to see how different trading becomes when you use “REAL” money. Even though the wins and losses will be very small, it will affect your ability to place trades in stressful situations. You need to learn how you react under stress.
It is very important to stat at the $1 per pip level until you are consistently earning the desired number of pips each week. At this point don't concentrate on how much money you are making. Concentrates on how many pips you are earning each week.
Depending on your trading method and frequency of trades, a consistent 20 -50 pips a week is a very good goal to shoot for.
If you can average this over 6 month to 9 month period, you can start trading with more leverage.
50 pips a week may not sound like a lot, but if you are trading a standard account at 20:1 leverage (1 standard lot per $5000) and earning 50 pips a week, that is $500 week or 10% a week. That is an outstanding return in anybodies book.
So How long does it take to get to this stage?
Well that depends on you and your dedication to the craft of trading. If done properly and you do not rush to trade bigger lots, it can takes as long a year or more to get to this stage.
Most likely your first trading method might not be the right method for you, so you will have to go back to the demo trading stage to test out new methods.
Also, you may fall into the "search for the holy grail" mentality. Trust me, you will waste a lot of time looking for the perfect trading method. It doesn't exist. All trading systems have strengths and weaknesses. What you are doing is looking for a trading method that fits your personality.
Trading the Forex can be a very rewarding profession, but like anything rewarding, it takes time and discipline to get good at it.
Anyone can learn to become a good Forex trader, but not everyone will put in the time and effort needed.
I hope you found some value in this article.
Happy Trading
Paul
7 necessary Steps to Becoming a Successful Trader
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