Forex education, demo trading, and how to know when you are ready to trade with real money.
• Get smart.
If you are really serious about becoming a professional forex trader or about making consistent money in the forex market than it is imperative that you obtain an education on the forex market and how to effectively trade it. There are many great resources to learn from on the internet and elsewhere about forex and how to trade. A few of the more trusted forex educational resources on the web include the following:
http://www.babypips.com/, http://www.investopedia.com/, http://www.learntotradethemarket.com/, http://www.forexfactory.com/.
There are also some great forex trading mentors that are willing to educate you on how they successfully trade the forex market. These typically are subscription based services or educational packages that you have to pay for, however if you find one from a genuine and trusted source it will likely save you tons of money and time over trying to teach yourself and committing all the usual emotional trading mistakes.
• Demo trade.
Demo trading is a necessary stepping stone for all forex traders. Even if you have spent 6 months studying forex and how to trade it, you still should trade on a demo account until your forex strategy begins returning consistent results for you. Furthermore, many beginning traders erroneously jump head first into trading with real money and often commit many “stupid” mistakes as a result of not being familiar with their trading platform functionality. Successful demo trading of a minimum of 1 month, preferably 3 should be viewed as a requirement to long-term trading success.
• Plan your trades and trade your plan.
Having a defined and tangible trading plan is critical to long-term trading success. If you do not have a trading plan you will make emotional trading mistakes, plain and simple. And this is the same reason why most traders fail, because most traders are too lazy to spend the time and effort on making an effective trading plan or they simply think they don’t need one. Trading plans can be rather subjective and as a result many traders do not know where to begin when writing one and sometimes give up as a result of this. A good way to kick off your trading plan is simply to make an excel spreadsheet that includes all the trading parameters from each trade you enter, you can then form this trading journal into a complete trading plan. This will work to keep you accountable to yourself and give you a concrete way to track your progress and learn from your mistakes. Some of the parameters you will want to include in your trading journal include the following:
Entry date, Security (forex pair) being traded, Entry price, Exit price, Possible risk, Possible reward, Position size, Total profit / loss, Risk to reward ratio, Exit date.
This not an all inclusive list, but the above parameters should all be included in your trading journal, you should of course add to it as you see fit.
• Going live.
Finally, how do you really know if you are ready to start trading with real money in the forex market? Well, there is not concrete answer to this question unfortunately, but typically there are a number of factors that are present when you are truly ready to go live.
Success on a demo account is typically a sign that you at least have an effective trading strategy that gives you a truly competitive edge in the market. If you can maintain relatively consist profits for a period of 3 months on a demo account than you likely are ready to try your hand at live forex trading. However, keep in mind that demo trading involves almost no emotion because there is no real money on the line. Very often traders experience success as demo traders but then fail to find the same success once they begin trading with real money. This is because trading success is all about managing your emotions and your risk effectively every single day, and there simply is no risk or emotion when you are not trading with real money. Demo trading is still very critical and useful for getting down your forex trading strategy and trading plan and making sure all the kinks are worked out before you go live, just don’t use it as a crutch.
We hope you have learned many important insights from this forex strategies mini-course and best of luck to you in your forex studies and trading!! By:http://www.forextradingstrategies.org
Demo accounts became widespread in the twenty-first century, along with online trading. They are marketed to customers as a way for a customer to test a platform’s user experience and features before committing their own money to these investments or paying the platform trading commissions
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