Things you should know before start trading Forex

Your trading will be filled with a lot of reading, and even more doing. Long term trading success is a continual process, not a destination. You will have ups and downs where your intellect and your ego will be tested in ways you’ve never felt before. Embrace it, and acknowledge that your work is never done. This is the beauty of trading and why we love being a part of it.

Discipline

Ask any successful trader and they will tell you that the key to trading success is discipline. Everyone has heard the expression “cut your losses and let your profits run” yet many simply do not do it. Many traders hold on to losses hoping they will reverse eventually, only to see the loss get progressively larger. These “irrational” trading decisions are based on emotional reactions that have no business being part of your trading plan. Recognize them when they happen or your trading career will be cut short.

It’s Not about Being Right

It’s not about being right, it’s about making money. So, if you find yourself caught up in how many winning trades you make your focus is on the wrong thing. Sure, we all want winning trades since that is how we make money, but there are profitable traders who are right only 40% of the time, just as there are ones who are right 70% of the time. It all depends on how they are managing their risk, so get use to reevaluating your trading decisions often and be comfortable with being wrong.

Trade to Trade

It’s ok to sit on the sidelines, in fact there are many times when that is the smartest thing you can do. Too often traders believe they always have to be in the market when they really just need to be patient. Use these times instead to monitor other developing trading opportunities, evaluate your trading plan, or simply enjoy the pleasures of life.

You are relying on the dealer’s creditworthiness and reputation

Retail Forex trades are not guaranteed by an exchange or a clearing organization. Furthermore, funds that you have deposited to trade Forex contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt.

There is no central marketplace

Unlike regulated futures exchanges, in the retail off-exchange Forex market there is no central marketplace with many buyers and sellers. The Forex dealer determines the execution price, so you are relying on the dealer’s integrity for a fair price.

Forex Trading is not a Get-Rich-Quick Scheme!

Short term trading is not for amateurs, and it is rarely the path to “get rich quick”. You can’t make gigantic profits without taking gigantic risks. A trading strategy that involves taking a massive degree of risk means suffering inconsistent trading performance and often suffering large loss. A trader who does this probably doesn’t even have a trading strategy – unless you call gambling a trading strategy!

Forex trading is a skill that takes time to learn.

Drill this in your head: there are no shortcuts to Forex trading. It takes lots and lots of time to master. Skilled traders can and do make money in this field. However, like any other occupation or career, success doesn’t just happen overnight. Forex trading isn’t a piece of cake (as some people would like you to believe). Think about it, if it was, everyone trading would already be millionaires. The truth is that even expert traders with years of experience still encounter periodic losses.

And the most important thing: do not open a live trading account until you are trading profitably on a demo account.