Trading on the foreign exchange (or Forex) is a tremendous opportunity available to anyone willing to take the time to learn the basics of this fascinating and extremely rewarding investment tool. But it’s not a get-rich quick scheme! You can lose everything. All the same, speculating on the currency market is a relatively easy skill to learn. What isn’t so easy to learn is keeping your emotions out of it! Hopefully this series of articles will give you some ideas on how to counteract this terriby frustrating dilemma that usually trips up intermediate forex traders.
If you don’t know anything about trading on the Forex, or even what it is, don’t worry. Learning all about the Forex is actually the easy part. You will want to do two things: take a Forex course AND open up a demo account that will allow you to trade with fake money. Go to BabyPips.com and take there 100% free School of Pipsiology. It’s an extensive course, but once you’re done with it, you’ll definitely know what the Forex is all about.
Free demo accounts are available from a number of different brokerages. Start with Forex.com or FXCM.com. Sign up for one, download their platform (you’ll need an internet connection and your own computer. A decent wireless connection will work), and chew that demo account up. Try out the various strategies you’re learning. Don’t worry if all you seem to be doing is losing money. All you want to do is get the hang of trading. It’s kind of like learning to ride a bicycle.
Trade on a demo account for about a month before deciding to go live. Once you’re there, you can officially consider yourself an intermediate Forex day trader. Congratulations!
Intermediate Day Traders
The danger zone for Forex traders is the intermediate phase, and that’s unfortunate. You’ve probably spent many months trading, you know all about charts, technical analysis, fundamental analysis, what the forecasts look like, and are even following the financials from a variety of different countries regularly, but for some dumb reason keep losing money! What’s also unfortunate about the intermediate phase is that you’ve probably hit a few home runs and have managed to quadruple your account balance, only to turn around and lose everything. What tends to happen now is that you use those home run experiences as “goal posts” to get to, but for some reason have been unable to. I completely understand! I cried many times throughout my intermediate phase (and you probably have to). My advice to you at this point is: Keep At It!These articles are for you.
Before going any further, ALL INTERMEDIATE TRADERS SHOULD BE USING A MICRO-ACCOUNT! These tiny accounts allow you to trade nickels and dimes, and carry minimum deposits from $10 to $100. Again, FXCM.com offers a micro-account with a minimum deposit of $25 and they allow you to use everything a typical standard account comes with. The reason for the micro-account at your level is so that when you wipe out your balance, you can jump back in easy without risking the groceries. You won’t be able to make a living with a micro-account (shoot for about $100 to $300 per month), but you can work your balance up to the minimum required for a standard account after which you can make a living with a better grasp of the Forex.
Here are the main points of advice to remember when trading with a micro-account:
Due to the size of the account, you should only trade a single lot at a time. Maybe, MAYBE, two if you’ve at least doubled the minimum deposit. Anymore than this, and you’ll probably get a margin call.
Also because of the size of the account, you should only make a single trade per week. Maybe, MAYBE, per day if you’ve at least doubled the minimum deposit. This is because the amount of margin you carry won’t allow you to hyper-trade and you’ll probably get a margin call via whittling your account balance down.
Expect a profit of anywhere between $5 and $7 per day. That’s it! So that would make about $30 to $42 per week. You can make more, but because of the size of your account, you’ll probably get a margin call if you wait to see if that actually happens.
Set a minimum amount that you will request a check. I suggest between $50 and $100. Once this point is reached, leave the minimum amount in your account and REQUEST A CHECK for the rest. Place these profits in a seperate bank account far away from your trading platform. The temptation is to leave your account balance in the trading platform thinking you’ll just add to it. But of course, this doesn’t happen and you get a margin call leaving you with zero.
Remember the above four points. Before continuing on to our next segment, from this point forward consider yourself a swing trader throughout your intermediate phase. That is, you’ll make your single trade on a single lot and leave it alone throughout the ups and downs for a number of days (preferably from 3 to 4, if not a week). You will moniter this trade and when you spot a profit, end the trade. You will then come back either next week or the next day for your next trade.
Our next article will consider intermediate techniques for deciding on a trade. Good Luck and see you there!