Forex Trading Success is Highly Dependent on Broad-Based Experience

By: admin in Forex Consultant on Jan. 4, 2011

Trading currencies was never meant to be an easy lifestyle, despite the marketing claims of many in the industry.  It involves high risk, even higher stress, and unless you are working in a “boiler room” facility with other traders, it is also a very lonely profession as well.  Specialized training is a “must have”.  At the beginning, you must accept your “amateur” status and soak up as much knowledge as you can from the experts and then incorporate the wisdom of their guidance in your daily regimen.  Next to knowledge and emotional control, the most important factor for success is experience.  You must put the time in if you wish to get anything out of forex trading.

In the investment world of stocks, “paper trading” is often employed to gain experience, but the process in no way replicates an authentic trading environment.  Luckily in our profession, forex brokers have devised an invaluable tool to promote a structured path for obtaining experience before your first dollar is put at risk.  After you open a forex account, you may gain access to the broker’s free demo account platform.  You will be given an amount of “virtual” cash that you can then trade using real time forex quotes.

These demos are as close as you will come to simulating authentic trading conditions, but your practice sessions must be planned ahead of time so that each one focuses on an area that needs attention.  Professional athletes practice in a highly focused manner to ensure that time is not wasted and that specific areas that need work are immediately addressed.  Although you must be your own “coach”, plan out your time and what topics you will address on your demo system, before you turn it on.

Initially, this scheduling effort will be easy.  You have to familiarize yourself with the trading software, how to set up the technical indicators that you want, access currency pair data, how to execute orders of all kinds, review results, and then finally to fine tune your stepwise trading plan.  You will also want to practice employing prudent risk management techniques to protect your downside and lock in precious gains before closing a position.

You want to get your personal plan to a point that it is rote, meaning that you can execute the steps without allowing the emotional components of your brain to interfere.  Somewhere during your training period, you may have touched on the importance of trading psychology.  The key takeaway from that topic is that having a routine decision-making process, practiced to the point of becoming a habit, is the best method for blocking your emotions from unraveling your best laid plans.

How much practice time do you need?  Are you sitting down?  Most professional traders claim their success was derived from demo practice sessions of three months or more, before they ever put their own money on the line.  Until you become confident in your ability to act under pressure and in your trading plan, you will never have the consistency required for real time trading.  Trading will involve many losing trades, sometimes more often than the opposite, and you must learn to cut losses early and let your winners run out to ensure a “net” positive result over time.

Many traders also employ backtesting to gain more experience, but that is another topic entirely.  Suffice it to say for now that this process broadens your understanding of the market and how your trading plan must react to support your objectives.

Experience counts!  There are no shortcuts!

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