Every journey starts with a single step
This guide was written based on the few chapters from my old E-book called “The Forex Traders Handbook” I wrote back in the 2015. In order to learn to trade forex (or any other financial market) you have to invest time and energy to become a successful trader.
Here is feedback from few readers back then…
Tomek K. says: “Definitely a must read for every beginner but also advanced traders can refresh the basics of investing!”
Tina says: “It’s very well written and a must read for every beginner!”
Edward says: “This Ebook has a lot to say that will help any struggling or brand new person in trading the Forex Market. Take the time to read this and actually follow the advice given because it was written to actually “HELP YOU” not just to make a quick $buck off you. Zan the author is for real if you have questions contact him be patient and wait for an answer. Show him the same courtesy you would expect. His success can be your success if you want it and he will do his best to help you.”
Marc says: “This book succeeds in giving every new trader and failing trader the information they need to become successful. It’s a great point to start to learn about the world of forex trading. If I had had this book 5 year ago I would be in a better place now. By the way I also noticed Zan also produces a weekly video on Youtube on what to look for in the week ahead. Again very simply explained. I keep this book for reference when I trade to remind me of things I should and should NOT be doing.”
Silvia says: “Forex trading and the financial worlds has – up until now – been something which seemed way to complex and risky to ever get started in. This book was really eye-opening in that it show how anyone can get make money with forex trading. Yes, there are risks involved and ongoing effort is required –yet by starting small and building knowledge and gaining experience, this can certainly be something to provide an additional income stream. If you have the ability to put a little “play” money on the side to experiment, I recommend giving this a try.”
Patrick says: “Learn about the Forex Trading System as well as other key strategies and discipline to trade with foreign currency. I enjoyed reading this eBook because it was interspersed with graphics that helps the reader grab and learn the concept. This eBook is for beginners just like in the title. What you will take away from reading this short eBook is that anyone can start as a beginner. To be successful the author recommends you be strict in your discipline and use the rules he shares in the eBook. I recommend this eBook for beginners in Forex Trading.”
Rick says: “Zan’s guide is a good general starter to pick up terms, and a quick look at chart analysis. There is nothing under the sun that will ensure a 3000 pip day. But, read this and you will know with a little practice where you missed it in either the long or the short of it. Pick up on tips from his experience for trigger points that historically herald rise or fall in short term.”
Let us start now… Learning to trade is an investment in yourself. If you want to learn to trade forex, stock, futures find yourself a forex mentor if you want to fastrack your trading progress and save time.
What is Forex?
Forex (Foreign Exchange Market) is the most heavily traded financial market in the world. On each trading day more than 4-5 trillion dollars is traded.
We can make profits on both – rising and falling markets. Forex is available 24 hours per day, except on the weekends when the world banks are closed. This allows you the ability to work as a trader from anywhere in the world as long as you have laptop and internet connection.
Trading is made across 3 trading sessions:
- Asian Session
- European Session
- North American Session
To see timings of trading session you can check Forex Market Time Converter here.
You are probably asking yourself now, why are Forex Market sessions so important… Because different trading sessions are more volatile than others. As traders we strive for price volatility, which means that we like to trade during volatile hours like a London and New York session.
Forex is practically open whole working week which does NOT mean, that we must be always there and trade it all time. It just means that you can build up your trading business around time zone of the country you are living in.
And what is even traded on Forex?
Forex/Foreign Exchange Market is very important, because it plays a major role in determining the global exchange rates. This means the number of units of one currency pair, which is to be converted, exchanged to obtain one unit of another currency.
Participants of the Forex Market:
- Banks (Centrals and Commercials)
- Financial Institutions
- Insurance Funds
- Traders/Individual Investors
There are two reasons for their participation on Foreign Exchange Market. First is profiting from the movement of currency pairs, and the second, protection against the major fluctuations of currency pairs that affects trade with services and goods.
Why to trade Forex?
Being a forex trader is not only a responsibility, a job, but it is also a lifestyle. Anyone who is ready to invest in his trading a little bit of time, discipline and patience can achieve that. To make it clear right from the beginning – trading is not a “get rich quick” business, but it is result of your process, your work. I am telling you that because a lot of people are thinking just about making some quick profits, money and it happens, that they ignore the risk and forget the basic rules of their trading system. Of course if they even have it! That is for me the main reason why 90% of people are consistently losing – wish for making a quick profits and over-exposing their trading account with huge risk.
The goal of every trader is to be a successful by consistently growing their trading account with discipline and patience. Because of that, it is very important, that everyone starts with the right direction and knowledge.
- HIGH LIQUIDITY
- With more then 4-5 trillion $ daily turnover Forex is the biggest market, which allows us to move quickly into or out of position/trade.
- OPEN 24 HOURS PER DAY, 5 DAYS A WEEK
- which means that you can adjust your trading business based on your free time and the time zone of the country you are living in. Nice, huh?
- ACCESSIBLE TO EVERYONE
- You can start only with the 200-300$ big trading account, and it is not, as for an example, like traditional business, where you need a big investment, capital just to start. Of course those 200-300$ will not make you rich trading, but it is enough to build up your trading experiences, get confidence and get used to trading on live account and growing it up slowly.
- WORK IS RELAXED
- as there is not many main trading pairs (10-20), which means that we do not have to analyze few 100 products every day.
- because you can perform your trading from anywhere in the world. For that, you only need a laptop/computer and internet access. One Mojito please!
- TRANSACTION COSTS
- are very low, negligible in comparison to other markets.
- of making profits on raising as on falling markets. As you can see, there are many reasons why being a forex trader rocks. My favorite reason, and what caught my interest in trading from the right beginning, is a freedom once you master trading process with right habits and skills. But most importantly – do not start trading if you do not have passion for it. Without passion everything is useless.
Only 4 Things You Need to Trade Forex
When you start setting up your trading environment, from which you will be able to trade, is important to know what things and tools you will need. The society and trading industry is forcing you with the all possible products and services that will make you happy, better and more successful trader. They are trying to convince you that more is better. I have to disappoint you. In trading the less is more. Less clutter means sharper focus on what you are doing in the life and markets. Learn to trade forex by focusing on yourself and our trading.
Here are four things you need for your trading business:
- TRADING ACCOUNT AT YOUR FOREX BROKER/BANK
For those who are not familiar yet with what the forex broker is, that’s an intermediary between the networks of banks, that trades with each other, and you. The broker will offer you a price of a currency from the banks. It’s like opening a bank account. It takes day or two to open it, and some paperwork. Beside the trading account most brokers will give you access to their trading platform, from which you will be able to watch the market and trade.
- STABLE INTERNET CONNECTION
To be able to access to your trading software, you will need internet connection. It really doesn’t matter what type of it. You can use main home route connection, home’s WIFI or free WIFI from your local cafe. The way I trade – swing trading – is relaxed, simple and doesn’t cause stress. Heck, it requires even less than 30 minutes a day, so you can easily trade from your old laptop and free WIFI.
Trader’s mindset is in my opinion at least 80% of trading success. Depends on statistics, that are showing that less than 5% real traders are making money consistently in trading, we can agree that problem in mass is mainly in the mindset. That’s one of the reasons why I’m writing this book. You can be scared and say “Majority is losing money in trading. I won’t trade.” or that fact can motivate you to learn what the small percentage is doing right and rise above the crowd. Everything is between you and the markets. You decide and learn by practicing consistently. You can read 100s of books on trading, you can join 10s of seminars, but it won’t help you if you don’t work on your mindset by practicing discipline and patience, understanding the charts and market moves, applying the risk and money management rules.
These days you can’t trade without owning a PC or laptop. It was different twenty years ago when there were no computers, charts and all you needed was a phone to call your broker and set your orders on the markets. Yes, I wasn’t trading yet twenty years ago, but I know my friends did start back then and told me how it was. Don’t wish for those times to arrive again! Times luckily changed and living the mobile lifestyle is on reach of anyone’s hands. You can bite in the freedom cake, travel around the world with the laptop in your right hand, connect to the local Wi-Fi and you have immediately access to your trading platform and eye on what’s going on world’s financial markets.
Simplicity is your friend.
Personally I trade from the laptop. Nothing else. Please don’t be one of those traders who are literally attached to the markets 24/7 with their smart phone trading application in their left hand, tablet computer in their right hand, and a trading computer right in front of them while they listening to CNBC or Bloomberg TV channel in their background. Please stop there.
You don’t need the most expensive computer, large desk, $2000,00 chair, expensive monthly-fee market data… you don’t need to buy ten monitors like some do before they even learn on how to trade. My opinion is, if you know what you are looking on one monitor that’s more than enough. Personally I went from two PCs, expensive “forecast” software I bought for $3000 in my early days, and expensive market data feed, back to the basic PC and broker’s free charting software.
I agree with saying, the more stuff you own, the more stuff owns you. Keep it simple as possible.
“LIFE IS REALLY SIMPLE, BUT WE INSIST ON MAKING IT COMPLICATED.” – CONFUCIUS
Confucius was right. As humans we like to over-complicate our life’s with unnecessary clutter and things we don’t actually really need. I would recommend you to de-own those in order to sharpen your focus on your life’s vision and goals. I am minimalist when it comes to stuff and clutter, and maximalist when it comes to the opportunity. I believe more in producing rather than consuming.
Stuff doesn’t matter. Experiences and people you meet matter.
I would encourage you to do the same in your life and trading. Burn, sell, throw away, donate or whatever you want to do with unnecessary stuff you don’t really need in your life and trading.
What is Currency Pair?
As I said before, Foreign Exchange Market plays a major role in determining the global exchange rates. This exchange rates are presented as a currency pairs which tell us the number of units of one currency pair, which is to be converted/exchanged to obtain one unit of another currency. Two separate currencies are needed to make a trade.
Currency pair consists from 2 symbols where each symbol have always 3 letters; first 2 are telling us the name of the country, area, and the third one the name of the currency that that country have.
Currency pair rate (exchange rate) is the value of one currency expressed in another currency. If the value of AUD/USD is for ex. 1.1100, this means that 1 Australian Dollar is worth 1.1100 of American Dollar.
There are 8 major currencies:
- USD (United States Dollar)
- EUR (European Union Euro)
- JPY (Japanese Yen)
- CHF (Swiss Franc)
- CAD (Canadian Dollar)
- AUD (Australian Dollar)
- GBP (Great Britain Pound)
- NZD (New Zealand Dollar)
We know six currency pairs groups. We will take a look on each of those. First group is Major Pairs, whose pairs contain American Dollar and are most traded.
1) MAJOR PAIRS
2) EURO PAIRS
3) YEN PAIRS
4) POUND PAIRS
5) OTHER PAIRS
6) EXOTIC PAIRS
Exotic pairs are less popular, they have lower liquidity and bigger “spread” (difference between buying and selling price – cost of trading).
You are probably asking yourself how many and what pairs should I trade?
That purely depends on what type of trader you are or you want to be (swing, day trader, scalper) – do you want to trade on higher time frames or lower time frames, how long you hold a position, how much time do you have each dayetc. Trading styles are explained in one of the next chapters.
I personally analyze and trade 28 pairs (except exotic pairs) and it does not take me more than 20-minutes a day. From my experiences I would recommend you to start with a 4-5 pairs and you can add lately more pairs. Of course, if you want to!
Go Long, Go Short
On forex it is possible to create a profit (or loss) in both rising and falling markets. If you learn to trade in both market directions, you will have more trading opportunities, as if you would trade only when markets are rising.
“LONG” -> it means, that we are buying the market, main currency
“SHORT” -> it means, that we are selling the market, main currency
What we are doing as traders is, that we are buying one currency and selling other one.
If we go Long (BUY) EUR/USD, we actually BUY Euros, and Sell Dollars.
If we go Short (SELL) EUR/USD, we actually SELL Euros, and buy Dollars.
What is Pip?
Pip stands for the smallest shift in currency pair quotation (price-in-percentage).
If the value goes from 1.0000 to 1.0001 that means that price grown for 1 PIP
If the value goes from 1.0000 to 1.0010 that means that price grown for 10 PIPS
If the value goes from 1.0000 to 1.0100 that means that price grown for 100 PIPS
If the value goes from 1.0000 to 1.1000 that means that price grown for 1000 PIPS
This is only for the information. However there is no need to worry, because most of the trading platforms have “Pip Meter” – you click on the chart with the mouse, move it and you will immediately see the number of pips – so you do not need to count and think. Of course, also every price movement for X pips means X $/€ but that also shows-up automatically in your trading platform. So you do not need to count that too. Thanks to the technology!
What is Spread?
Spread is the difference between selling and buying value of currency pair you trade. Mostly all quality brokers, where you open your trading account, have spreads in around the same range. With other words – spread is negligible cost of transactions, trades.
Example for AUD/CAD (Australian Dollar/ Canadian Dollar).
Difference between selling and buying price is 4,7pips.
When you are choosing your broker, it is very important that you look for the spreads this broker is offering you for each currency pair. I would like to suggest you to choose the broker that have spreads for the main currency pairs in the range from 0-5 pips.
Let me give you a simple example for Switzerland’s broker Dukascopy. As I am writing this, it′s following average spreads are EUR/USD 0.26pips, GBP/USD 0.86pips, AUD/USD 0.99pips, USD/CHF 1.36pips, GBP/CHF 2.80 .. As you can see, this broker has spreads in the range of between 0-5pips which is very responsible and “low-cost” in the trading industry.
You do not want to choose the brokers that are unregulated, unknown, and with the huge spreads.
Margin and Leverage Explained
Margin is deposit required to open or maintain a position, trade. The margin is expressed in %, typically around 0.5% – 2%, which means that if you want to, let′s say, open 100,000 EUR/USD, you need to have at least € 500-2000 on your trading account.
Leverage simply means that you can trade higher sum than there is your amount of trading account, which is used only as a margin.
Of course bigger leverage means also that potential profit/loss are bigger, but no worry -that is why we calculate the maximum risk on every trade and we make sure we do not risk more than 1-2% of trading account on trade, position.
Leverage is always expressed in the ratio 1 to X.
If someone have 1000€ worth trading account, and wants to open position worth 100.000 units of currency pair, he will use leverage in ratio 1:100.
If someone have 10.000€ worth trading account, and wants to open position worth 500.000 units of currency pair, he will use leverage in ratio 1:50.
Lot is the size unit you are trading.
There are 3 types of forex lots:
- STANDARD LOT = 100.000 SIZE UNITS
- Move for 1pip= +/- 10 $
- Move for 10pips=+/- 100 $
- Move for 100pips=+/- 1000$
- MINI LOT = 10.000 SIZE UNITS
- Move for 1pip= +/- 1 $
- Move for 10pips=+/- 10 $
- Move for 100pips=+/- 100$
- MICRO LOT = 1.000 SIZE UNITS
- Move for 1pip= +/- 0.1 $
- Move for 10pips=+/- 1 $
- Move for 100pips=+/- 10$
That of course does not mean that we can trade exactly only 1.000, 10.000 or 100.000 units of currency pair. You can trade as much as you can based on the amount of your trading account and risk.
Trading platform is necessary tool where we can do analysis, monitor the charts and do actual trading online. Personally I am using the Meta Trader 4 (MT4) for my analysis. MT4 is one of the most popular trading platforms for trading and monitoring the markets. Most brokers are offering an option to open a free demo, testing account, so you are able to check and test MT4 before you even try it with the real money.
Every good forex broker offers MT4 trading platform. It is popular because we can monitor the markets, customize the charts based on our needs, we have the important tools we need for technical analysis, trading is simple and quick… so everything that today′s trader need for a successful trading. I am using it also for my own trading and chart analysis. And the best of all – it’s free too!
In trading we know many different types of orders. Those that are most important and most brokers are offering are:
- MARKET order
- LIMIT order
- STOP order
- STOP-LOSS order
- TAKE-PROFIT order
At the same time let me tell you, that the first three orders are entry orders. Stop-Loss and Take-Profit are orders that we place together with the one of our entry orders, and they are our exit orders (when price goes in our way or against it).
Let me emphasize, that you do not have to using all kind of possible orders, but only those that fit with your trading system – entry and exit rules.
MARKET ORDER is an order for a buy or a sell at the best current price that is on the market. With that order you enter on the market directly, because you want to get the best price that is currently possible.
LIMIT ORDER is an order at which you set the price you want to enter on the market with a better price from a current price. If you want to buy, you would put a limit order under the current price. If you want to sell, you would put a limit order above the current price.
STOP ENTRY ORDER is an order at which you set the price you want to enter on the market with a worse price from a current price. If you want to buy, you would put a stop order over the current price. If you want to sell, you would put a stop order below the current price.
STOP-LOSS ORDER is an exit order, when the position, trade goes against us and protects us from bigger risk. We can call the Stop-Loss order an APO – Account Protection Order, because it actually protects us from the bigger lose. Stop-Loss order will automatically close our position, when price falls below or raise above price level.
TAKE-PROFIT ORDER is also, as a Stop-Loss order, an exit order, when the position goes our way. That means that Take-Profit order will automatically close our order or part of our position when it will be in profit.
Two Ways to Trade Forex Market
In trading we know 2 main ways to trade the markets:
- Fundamental analysis
- Technical analysis
Fundamental analysis addresses the economic, political and social data. Traders who trade using these data estimates the economy of each country, area and determine the future trends.
Technical analysis is based only on the analysis of the charts, which consist of a period of time and price. Trader then based on that, analyzes the products that he trades and then determine the entry and exit area.
We, traders who trade based on technical analysis, believe that most of the fundamental events, data, news are already in the price, chart, and we trade only based on price. With technical analysis we “study” the trends. On charts we are looking and waiting for a repetition in the price (patterns), so we can predict the next possible trend of a price move in a future, as history is repeating most of the time.
Because most of the professional traders, as me too, swear only on technical analysis, the next few chapters will be devoted exclusively for your understanding of the technical analysis.
Since most of the professional traders as me swear on technical analysis, the next few chapters will be devoted for understanding the technical analysis.
In trading we know many styles of trading. Main three are:
- SWING- TRADING
SCALPING – Those are the traders who like more trading action as they are in/out of the positions very quickly. Scalpers are experienced, fast and they know exactly what they are looking for. Knowing the trading system rules, following them 100% with patience and discipline, and having a lot of confidence in yourself and system. From the all trading styles Scalping requires a lot of time in front of the PC and may be, due to this, stressful.
DAY-TRADING – Day traders sit in the front of their PC for a couple hours a day, and watch for their trading setups. If you have 2-3 hours a day, few days a week, then you can do the day trading, and even combine it with a swing trading.
SWING TRADING – Swing trader is someone who do not trade against the main trend, and look for a trading setups in the direction of the major trends, so he can keep his trades open for a longer time. Swing trader is using higher time frames for his entries and to manage his trades.
In my opinion Swing trading is simple and “no-stress” way to trade the markets and profit from them.
Because, we do not have to sit in front of the PC for the whole day, or even not every day, depends on what timeframe you trade. For swing trading you need only 20-30 minutes a day, so you have a lot of free time and you can trade also, if you have many other obligations.
If you trade as a swing trader, you will not find trades every day. This is also the nice thing about swing trading. With a good and detailed chart analysis you will be able to make hundreds or even thousands of pips per trade in a good trending markets.
From my trading experiences I swear only on swing trading because it is relaxed way of trading, and I like to see the bigger picture and trade in the direction of the major trends as majority of big traders and institutions are doing so too. Swing trading also have, from my experiences, highest strike rate (win %) over the long run and better Risk:Reward with good money management rules.
Technical Analysis in a few words
As I mentioned before we are using technical analysis for analyzing the price movements over the time. When we learn to read the price action we can determine the market trends and based on that determine the entry and exit area.
Technical analysis can be used on any market, product. A lot of people is making a mistake here, because they over-complicate and they think they will read the charts better and more successfully, with putting a lot of indicators on their charts. At that time they simply forget for a Price, which is always correct and it will always shows us the right market direction.
We, traders who trade based on technical analysis, believe that most of the fundamental events, data, news are already in price, chart, and we trade only based on price. With the help of technical analysis we “study” the trends. On the charts we are looking and waiting for repetition in price (patterns), so we can predict the possible next trend of price moving in future, as history is repeating most of the time. Of course no trader is always 100% right in their decisions, but we are following our trading edge to stack as much odds as possible in our favor (confluence).
How to use price analysis to determine the market direction?
It is simple. You do not need any magic indicator to determine market trend.
THREE MARKET DIRECTIONS
- UP-TREND – We have an uptrend when the market is making Higher Highs and Higher Lows.
- DOWNTREND – We have a downtrend when the market is making Lower Lows and Lower Highs.
- RANGE (when there is no trend and clear direction) –We have a range when we do not have any trend. That means, the market is moving between 2 zones – Support and Resistance, and the market does not create new Higher High and/or Lower Low.
And when do we know that the trend has started changing its direction?
We know that when the chart starts showing us signs of the possible change – lower low in an uptrend, higher high in downtrend and higher high/ lower low in the range.
Types of Charts
Charts are generally showing us human psychology, because all price activities that are going on the markets, can be plotted on a chart. Charts are basically showing us the behavior of market participants. We read the chart from left to the right, and it is composed from 2 things: Time Period and Price.
Why we have to read the charts?
Because the chart reading is necessary basic of the technical analysis and only that way, we can understand the price movement in past and future. In trading we know many different types of the charts.
We will take a look on four charts that are most popular:
- Line chart
- Bar chart
- Candlestick chart and
- Heikin-Ashi chart
LINE CHART is one of the easiest charts for the eye. It shows us only the last, closed prices at which currency pair, product was traded. Bad thing about the line chart is that shows us a lot of less information than the others do.
BAR CHART is a chart, where each bar shows us, represents a single period of price movements, time unit, open, close, higher and lower price of that trading period. For example on the Daily chart, each bar present ONE trading day, and it is the same for the other time frames.
CANDLESTICK CHART shows the same information as a Bar chart, but it is nicer on the eye, as it shows us also a body and the color which tell us, whether there were more buyers (green) or sellers (red) in that trading period.
HEIKIN-ASHI CHART is also part of our trading method and therefore, I am using it also for my own trading. It looks similar to the basic candle stick chart, but it is a little bit different in method of calculating the candles.
Forex Support & Resistance Zones
Support and Resistance means the level of demand and supply.
Support on a product is a level of the price, at which on the market there is more demand over supply. This causes that the currency pair stops and increase.
Resistance on a product is a level of the price, at which on the market there is more supply over demand. This causes that the currency pair stops and drops.
As a traders we have two tools for drawing support and resistance levels on the charts:
- Horizontal line (for horizontal level of support and resistance)
- Trend line (for a trend, when we have higher/lower highs/lows)
EXAMPLE UPTREND – When we have a higher highs and higher lows we are drawing support line – connecting the lows.
EXAMPLE DOWNTREND –When we have lower lows and lower highs we are drawing resistance line –connecting the highs.
EXAMPLE RANGE –Market does not create higher high/lower low. We use horizontal line and connect the previous highs and lows.
Why areas of the Support and Resistance
Because we expect there a price breakouts and bounces due the large sums and number of orders there. Why? Because most of the professional traders, who trade for funds, banks, countries are looking for the areas of support and resistance, and then they are entering on those areas in and out of the trades with a large sums of capital.
When we expect bigger price breakouts or bounces we have to be focus, and watch for our trading setups, entries. And that is where the trading system, edge is very important!
Trading System and Edge
Trading system, strategy is one of the 3 key factors which constitute a successful trader, who must master a powerful trading system. Why? Because he is aware, that he can trade successfully only, if he knows exactly what to look on the charts and how to manage a position, when it moves in his way or against it.
With the trading system you want to achieve the following:
- To simplify the chart analysis
- To minimize the losses and maximize the profits and
- To minimize the trading with emotions (to grow you discipline and patience)
Trading system should be clearly composed from those 5 things:
- When to enter
- When to exit
- When to take a profits
- Where to place a Stop
- When to wait
One of the biggest problem I was doing in my early days of trading, and many unsuccessful traders are making, is that they are always changing their trading system; they have 1-2 unsuccessful trades, and they are already looking for a “better” and “better” and “better” trading system… and the problem is in their trading psychology, mindset, because they blame everything on the trading system. It comes to that the become a confused, they do not have the right information, knowledge, they complicate, and they do not make any step further to successful results. It is a fact, that no trading strategy will give us 100% winning trades. And not because our trading system is bad or something, but because the market will do what it wants and whenever it wants. That is why we need to stick to one good, powerful trading system, which is composed from the five above mentioned things, and simply just trade to grow your confidence and improve your discipline and patience.
Trading journal is your personal document which helps you to move your trading on a higher level with the results you want to achieve. If you want to be a professional and enjoy life the trading is offering, then a trading journal is your must-tool. Trading journal can turn an average trader into very successful one.
Often I see many of new traders who simply do not use it in their own trading. In my experience there is a connection between many successful traders and a well-documented trading journal.
A trading journal is your personal document of your trades. It is a true record of your success and failures and permits you to revisit the trades and learn from them. You need to develop a disciplined approach towards your trading and a journal is not good for you if you are not consistent and you use it for every trade you take. So that you can learn from your own mistakes and see, what is giving you the results you want. As a trader you have to focus on yourself and your own trading!
All successful traders started somewhere… They wanted to become one of those who are they today. They wanted to be a leader of their own trading. They wanted to change their bad results into consistent, profitable ones.
And how did they achieve that?
By learning a good trading system, by learning from a already successful trader, mentor, they traded with discipline, patience and by learning from their mistakes and trades.
It is the same for example in sport. They have trainings, matches, they are learning from them, improve themselves, doing what is working best for them and get rid of everything else.
How you can make yourself a trading journal?
As you want! What I am doing personally is that for every entry chart I make a screenshot and paste it into folder, add a commentary, and lately add also a chart from the end result, management of the trade etc… It does not take more than a minute, so laziness should not be an excuse! If you have a passion for your trading, learn to trade forex and try to become the best trader possible. Invest some time in your trading plan, trading journal, and learn to trade forex with the right trading skills and habits.
Beside the trading journal, trading plan is a second most important tool for a trader. As there are rules for employees in companies, it is the same here. Trading is your personal private business. That means you have to create yourself your own personal trading plan and follow it – you can’t just change it every day.
Trading plan should be a simple and clear with the important information only. A lot of traders complicate and they make ten pages long trading plans, and they simply cannot follow it. That is why your trading plan should not be more than one, two pages long.
Most important things you must include in your trading plan:
- Your Short-term and Long-term Goals
- Daily trading routine and times
- Entry rules
- Exit rules
- Money Management rules
- Your trading style and approach
- Markets/pairs you will trade
- (personal rules/notes) –ex.”Follow my tr. rules on the next 10 trades” or “Trade with a trend” …
Because you can say “That is the best trading system and it is perfect“, but if you do not follow your trading plan and you do not trade the all setups based on your trading plan, it can still be a failure.
IT IS NOT A MISTAKE FROM BROKER, MARKET OR TRADING SYSTEM, BUT THAT YOU CAN′T FOLLOW YOUR OWN TRADING PLAN.
That means you have to plan your actions, your trading style, your time, routine, markets you will trade,… Without trading plan you can not achieve anything. Trading plan is your own personal business plan and your daily guide to trading success! So make it and follow it 100%.
How to Calculate the Risk and Position Size
As traders, we never think about placing, entering in the trade without knowing where to place our Stop-Loss order, which protects us from bigger risk in case the market wants to go against us. Successful traders are only those, who successfully manage their trading risk. On the first place, a trader wants to protect his money and then minimize the losses and maximize his profits. Managing the risk is in my opinion one of the key factors for growing your trading account. As someone already told in past:
“IT DOES NOT MATTER IF YOU HAVE RIGHT OR NOT, BUT HOW MUCH YOU MAKE WHEN YOU ARE RIGHT AND HOW MUCH YOU LOSE WHEN YOU ARE WRONG.”
In my opinion the Money Management makes a trading less stressful and it is also a difference between success and failure. That is why calculating the risk on every trade is a crucial! I am using this position size calculator. It is very simple to use. In case you do not know how to use it, contact me and I will help you.
That is it!
I am sure this short guide will help you on your trading journey.
As my old trading mentor said:
“Trading is enjoying only if you do it correctly! With the right tools and with the right mindset…”
And why some people succeed and some not?
Everything depends on the mindset, trading system they are using and how they manage with their trades and emotions.
I wish you a lot of success and health,