Tips for people learning to trade the FOREX market from home

Demo trade before doing any live trading. Everyone says this, its true…. always test a new system or your first system using a demo account first. Demo is a good way to start. Be prepared for a shock when going to a live account using your hard earned money! Everything changes, losses hurt more, wins are way better, and the emotions can run away with you. Its another world compared to demo. The best thing to do is open a micro account with a few hundred bucks and trade pennies first. Get used to losing as well as winning, gain confidence before moving on to a larger account. And don’t move on until you are profitable using small amounts. Don’t get bored with pennies and try to jump ahead to make real money before you can turn a consistant profit first. It takes a lot of patience in the begining, being impatient can be expensive!

Don’t jump in to trades, you see the price action take off and think wow I want to get some of those pips! You jump in just as it reverses and heads the other way …. Arrrg! Happens way too often. Find or create a system and follow it. Don’t open a trade until your system shows a setup. There are lots of systems out there for free! The key is finding one that suits you and following it.

Don’t buy systems on eBay or websites! There are so many good free systems out there! The ones for sale are no better and some are very expensive! The same goes for education, there is so many free ways to learn trading… try them first! I have never heard anyone say “My system cost a lot but it was worth it!” Never! Its always the opposite! ” I spent alot of money and the system was no better or worse than some of the ones available for free!” They advertise stuff like “10,000 pips in 3 weeks!!” or something more incredible, grab your wallet and run the other way!! Training and education is the same also, be very wary of courses that sound great and are expensive. Most of the best training is available for free, and many forums have experienced traders who are happy to answer questions and post charts to study.

Be wary of EA’s or autotrading. Sounds great at first… let the EA (Expert Advisor in Metatrader…) do the trading! I can make money just letting the robot trader run… who needs to learn!! I fell into this trap! I was having a hard time learning manual trading, couldn’t seem to find the right system. Went with EA’s for awhile and lost quite a bit of my account! I still like them, but only on Demo for learning. Some of them can be very profitable if used properly. Also don’t buy them on eBay or anywhere else! There are lots and lots of them for free!

Risk Management is very important in trading. Each trade should be only a small percent of your trading account. This also requires using a Stop Loss… very important!! Nerver open a trade without a stoploss! Calculate how much you will lose if your stop gets hit. This should be a small amount, for example 3% of your account. This is your risk for the trade. So then do the math, if your system calls for a 30 pip Stop Loss, with a $10,000 account, 3% would be $300, so the amount of the trade would be $10 per pip. This should all be worked out before you enter the trade. When the trade goes in your favor a certain amount, move your stop to break even. Then your risk is zero! Always be aware of your risk, don’t let it get above a certain level by opening multiple trades either, say a 10% to 15% maximum for example, don’t open anymore trades until the risk level drops. I can’t stress this enough, risk management will save your account from a Margin Call, which is one of the worst feelings ever…. poof and your account is gone! I have done this and it is very painful. Risk management is key to successful trading.

Money Management is the twin to Risk Management. The key is “Cut your losses short and let your profits run” everyone says this also and its very true. Its hard to watch a trade go the wrong way and hit your stop, but its harder to see a lot of money piling up in a trade and let it continue! People tend to close early and grab the quick profit! Trouble is you will never make much money this way. The best thing to do is close a partial amount and take some profit, move the stop to breakeven and let the rest go. Risk management has a stop loss, money management has a Target! Before entering the trade your system should have a target, where price action should go before turning back. This should be farther than your stop loss, say your target is 50 pips and the stop is 30 pips away, This would be a good Risk / Reward ratio, almost 2 to 1. In this example we could enter this trade and after 25 pips in our direction we move our stop to break even, eliminating our risk. Then let the rest go to target and close it, or close half at target and let the rest continue, and move the stop up to say +25 pips. You could let the trade go and keep moving the stop up behind it. This sounds easy but actually doing it can be hard, price usually zig zags around and can make you want to close early to at least get a small win instead of a loss, so you close with a + 10 pip trade and are relieved… then price zigs back up and hits your target eventually… your +50 trade ended early with +10! Stand by your system and acccept the risk and let the trade go!

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