Easy Forex Trading? Can it be possible? I laughed to myself as my second trade this week closed with a profit.
This wasn’t the case 6 months ago. In fact if you read my first blog post Beginners Guide To Forex Trading, you know that I started off confused, and frustrated like most.
I was determined to ‘figured it out’, and at times it was a painful experience that I hope to help you to avoid!
So yes, it’s true, learning forex can be easy and as with anything in life, it will take practice, patience and persistence.
In this article I’ll share with you a few of the same steps I took to transform myself from a hopeless looser into a confident forex trader.
Demo Forex Trading
If I haven’t mentioned it, all of the ideas on this site should be fully vetted in a demo forex trading account.
Why? There is an amount of risk you take whenever you enter the markets.
If I can offer you advice I wish I utilized when I was where you are right now? Use your demo account until the feeling of closing your trades with a profit becomes boring.
When you no longer say to yourself (or others) “OMG, I made $X in my demo account today… look, look!”, then you’re ready.
The reason you have a demo account is to ensure you’re mature enough, emotionally, to not get too charged about taking a string of losses or profits.
How long will this take? I can’t say. It took me 4 months of consistent (daily) practice. Some days there weren’t any ideal trade setups, but I checked my charts anyway to form the habit.
I took some bad advice and opened a live account before I was 100% ready. Don’t fall into that trap. Well meaning traders might encourage you to ‘make trading real’ by opening a small account before it’s time… resist.
I used four different demo accounts:
- Trader’s Way
- TD Ameritrade (Think Or Swim)
Based on your account size, your location and leverage requirements, you should select the best account for you.
It’s a subjective task to pick the ideal demo account so take your time, do the research because there’s no rush…
After using those four, I’ve narrowed it down to one and removed the others from my phone / laptop.
It could take you some trial and error before you decide. I suggest you ask your self the following questions as you’re using your demo forex accounts.
- Does it offer me the technical tools I need?
- Do the bid/ask spreads remain reasonable throughout the day?
- Does the platform work without too many glitches/freezes?
- Are the commissions feasible?
You should be able to answer “Yes” to each of the above questions before finalizing your selection.
Forex Margin Trading
Forex margins are usually what attracts people to trade currency. Is that what brought you here today?
Two years ago, I knew very little about the foreign exchange market outside of using currency kiosks at airports.
I was focused on trading options and finding excellent companies to invest in long-term. I always assumed you needed at least five figures in a Roth IRA to become a successful trader.
Talk about a jaw-dropping moment! When hearing that forex offered margin trading I said “WHAT!? REALLY?! INSANE!”
Soon after, my fingers hammered my keyboard in search of confirmation. To my delight, the person who told me was correct.
The next few weeks I spent all of my time reading and learning as much as I could about how margins worked, the reason behind them and the associated risk in using it.
Forex Margins were created by brokers so that traders could meet the lot size requirement of 100K.
That has evolved into what we now know as Standard: $100K, Mini $10K, Micro $1K and Nano $100 lot sizes.
Your broker decides how much margin is required for each trade based upon the amount of funds in your account.
For example, if you have $5,000 in your trading account with 500:1 margin, that’s the equivalent to having 2,500,000,000!
Insane, right? Therefore, when you are trading forex with a margin, be hyper vigilant of your risk to reward ratio. Always ask, how much am I using per trade compared to what’s actually in my account?
Say you have a $5,000 account and you use $5 per pip, a 20 pip stop loss can you could comfortably ‘risk’ a pullback of 20-30 pips before going in the right direction.
If another trader with $5,000 uses $500 per pip, and the trade goes against her 20-30 pips, even with a margin, the broker could call it and she’d be out of the trade at a significant loss.
In my experience the higher the margin I had, the worse I performed. The highest margin I had was 1000:1… I know, I know. It wasn’t wise…
I learned a valuable and expensive lesson. Today I use 50:1 and I couldn’t be happier with my results.
Find what works for you. Your #1 goal is to keep your money in your account. Your #2 goal is to grow your account and #3 is to scale it.
Forex Trading Fraud
If it’s so easy to trade forex, what’s all the noise about forex trading fraud? If you haven’t read about, or watched a video about the horrors of fraud, this seems to be the most appropriate time…
It was a Tuesday night, early midnight, I’d just started trading forex… I remember the day because I kept track of which brokers had the lowest spreads…
So, two charts were open. I had an automated entry preselected and entered into both trading accounts.
Once the price reached my entry, one platform accepted my trade the other allowed me to enter, then the price shot up (20 additional pips with a 30 pip spread).
I was shocked! I emailed the images I took to my broker.
But it was too late. His only explanation was that “they receive the prices from their liquidity bank and have control over the spreads…”
That’s why it’s important to text multiple trading platforms before funding a live account.
How to Choose a Trading Platform
Unfortunately there isn’t a “perfect” trading platform. Each one that I’ve tried has a flaw or two.
- Very responsive support team.
- Easy and fast to get started
- They reply to inquiries fast and provide a lot of information to help traders made sound decisions.
- Their mobile and MT4 (Meta Trader 4) platforms freeze regularly
- They have wide spreads so you end up paying more or dealing with higher volatility.
- Dedicated account managers (That is also a negative – as they encourage you to fund your account if you remove or loose funds.)
- Easy to transfer funds to and from their platform
- Easy to get started
- Offer high margins
- Very high spreads
- Irregular spikes in price
- Managed accounts by a sales rep (with minimal trading experience)
- Process to get started while intuitive was demanding (they require several documents)
Think Or Swim:
- An extensive library of technical analytics tools
- Knowledgable support team
- Built-in news reports
- Setup trading alerts (via email or SMS)
- Easy to transfer funds
- Mobile platform freezes occasionally
- Mobile platform isn’t intuitive to use
- Slightly higher commission fees than Traders’ Way (depending on lot size)
- They do not place counter or opposing trades
- Open to U.S. residents
- Fast trade execution
- Feasible commission fees
- Responsive Staff
- Provides an intuitive process to get started
- Limits leverage to 1:200 (Although this is plenty it might be a con for you)
- Doesn’t offer as many tools as Think Or Swim
I’m based in the U.S., which requires stricter guidelines for brokers. Several non U.S. based Forex trading platforms offer lower commission rates, spreads and the ability to deposit money into a crypto account.
While I recommend FX Choice, as they’ve provided the best experience trading forex, do your research and find the right trading platform for your needs. Do you really need high margins?
The Forex market can only do 1 of three things at a time. It can trend up, down or sideways. This makes your job easy.
3 Questions to Ask Before You Place Your Next Trade
- Determine the current trend
- Look at the trend prior to the current trend (was it consolidating? Or trending in the opposite direction)
- If the current price is higher than it was a 1 or 2 days ago, is there a chance for a pullback or reversal?
Continue to ask yourself these questions until they become a habit because they keep you focused on what’s really going on instead of guessing.
If the answers to the above questions aren’t clear, you may benefit from additional support.
In this blog we discussed how easy Forex trading can be. This should be a challenging yet fun journey of discovery.
You’ll learn so much about yourself such as what makes you tick, or excited and hopefully how to relax into the process of trading so that there’s minimal emotional baggage.
I’d love to hear from you. What do you find easy about forex trading? What questions or suggestions do you have about this topic? Leave ’em in a comment below and I’ll reply!