Want to Succeed in Forex Trading on Your First Try?: Six Tips to Greatly Increase Your Chances of Success

From all the traders I know I personally know none who were able to succeed in trading on their first try. Most – if not all of them – went through more than one live account before achieving any meaningful degree of success. Successful algorithmic traders had even worse first-try outcomes than manual traders – amongst those I know – mainly because people focused on mechanical trading tend to try more unsound ideas before getting into the “right path” towards profitable trading. On today’s post I want to share some tips – based on my experience – to help new traders out there succeed on their “first attempt”. I will focus on offering advice which might protect you from wiping your account, helping you get into a path towards rational profit expectations and an adequate mindset towards trading.

Certainly everyone wants to “get it” on their first try in the Forex market. I certainly believe that this is possible but it is a tremendously difficult task. The reasons why an overwhelmingly large majority of traders fail to do this seems to be related to their preconceptions about trading and the way in which they approach this business. Whatever you search for in the beginning determines to a good extent what you will hope to find later on and a “wrong turn” can make you fall back months (or even years) in your quest towards long term profits. On today’s post I will be offering you some tips which will help you increase your chances of achieving success on your “first attempt”.

1. Learn to correctly calculate risk related variables. I am appaled by the fact that many aspiring Forex traders have absolutely no idea of what a contract in Forex trading represents. They have no idea about what implications it has on the value of their positions per pip and they have erroneous views about the differences between balance, equity, margin and leverage. If you want to succeed in trading then the FIRST and MOST important thing you need to do is to learn how to properly calculate risk. If you’re entering a positions for a 10K contract on your current account what is your margin, how much are you risking per pip, how much does this represent as a percentage of your account ? If you can’t answer these questions I can almost guarantee you’ll fail on your first try.

2. Learn about statistics. A lack of knowledge in this filed of study makes many people fall into dangerous traps which seem to be rational from a “common sense” point of view. For example many new traders will stick to a system that has given them a few profitable trades, failing to realize that the “edge” they are supposedly using is simply a temporary random outcome of a global strategy that simply has no edge whatsoever. A lack of knowledge in statistics also generates very unsound practices such as Martingales and grids which ultimately fail in the long term. Remember that no edge arises from “clever” position sizing and any strategy that does have an edge can effectively survive without any dangerous money management techniques. If you do not know and do not want to learn statistics, it might be better for you to find another career path.

3. No demo, but small account. The more I talk to traders and learn more about the trading world the more I realize that demo accounts are a dangerous thing for most traders. They are useful to learn how the platform works – how to execute orders and that sort of thing – but they become absolutely dreadful when it comes to the preparation of a trader for a live trading experience. The problem here is that demos do not risk real money and therefore the psychological pain is very hard to bear. My advice here is to start with a 400 USD account on a broker who offers CENT accounts. Examples are IBFX, LiteForex and InstaForex. With these accounts you’ll be able to trade at 1 cent per pip meaning that you’ll be able to do a huge amount of trading before you even come close to wiping yourself out.

4. Limit risk per trade to 0.5%. With the above account you’ll be able to limit your risk to very low values per trade as you will be able to risk just very small percentages of your account. Normally people advice newbies to risk just 2% per trade as a general rule but I have found out that this is – for most people – too much from a psychological point of view. Anyone can take a 0.5% loss without to much problem and having this very low loss cap will enable you to take very small positions while learning a little bit from all of them.

5. Rush to profit, rush to wipeout. Greedy people in trading wipe their accounts (pigs get slaughtered as the traditional sayings goes). Remember that there are old and bold traders but there are no old bold traders. Whenever you trade you should remember that your objective here – in the beginning  – is simply to survive and learn how to make money. You are NOT here to turn your 400 USD deposit into a trillion dollars, you aren’t here to take excessive risks. You are here to learn and to understand how things work. If you make profit in a month and decide that you’re now “good” then you’re not and you’ll get killed. Pigs get slaughtered my friend. If you’re greedy, buy yourself a lottery ticket instead.

6. Measure yourself YEARLY against Barclay Index traders (information available on Barclay’s page for free). I get about one or two emails a month from a trader who thinks he or she found the “holy grail”, traders who show me a 1000% account which they have been trading for a month. You said it wasn’t possible and I did it – they proclaim – but the fact is that making money in trading isn’t hard, the hard thing is to keep it in the long term. None of these traders ever survive past the first or second year and for this reason you should aim to measure yourself yearly against Barclay Index Traders. If after 3 years you have been able to trade your account within the same profits as them then you’re in this for the long haul. Bear in mind that Barclay traders generally manage between 1-100 million dollars and therefore they have much more flexibility and better execution conditions when compared to you (it is a myth that the fact that they trade “bigger” means they have to be less profitable, as a matter of fact the “biggest traders” on the index generally outperform the smaller ones). If you beat them on a yearly basis – after a few years – , it is a VERY good thing.

The above tips are in no way an “insurance” against failing on your first try but they do provide you with some valuable information that will help you ensure your mistakes will have a smaller weight and their correction will be less painful. Learning about risk management and statistics will help you better understand what you’re doing, approaching trading as what it is, a probability-based business model. You’ll be able to learn and experiment with much less psychological pain and the lessons will come much cheaper and quicker. Comparing yourself to professional traders with adequately audited accounts will also allow you to see from a realistic perspective how you’re doing YEARLY and help you ensure you’re on the right track.

If you would like to learn more about my work in automated trading and how you too can earn a true education in this field please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

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