Every trader starting the currency trading journey strives to equip himself/herself with the best set of information on the market. While the aspirations to be a better trader and thus obtain a higher income, are common among novice forex traders, finding relevant educational material may be a challenging task. Despite the rising number of individuals interested in the spot forex market and the increasing internet use among people of all ages, the advice available on YouTube, Twitter, or any other media outlet may not serve a trader as well as it should. Nonetheless, beginners should still not lose hope because they can find some extremely original prop traders online whose profound insight into the currency market could shape these individuals’ entire outlook on trading.
Although these figures are not always the most popular ones out there, their innovative and practical approach can reduce the overall time you dedicate to trading and offer you efficient trading methods you can start using today. In order to reflect on some unique trading advice, after doing quite a bit of research ourselves, we have collected some of the most sought after pieces of information and grouped them under individual topics for you to feel safe at this critical stage of your path to becoming a better trader of currencies.
At the onset of the forex market as we know it, the quantity and the variety of available materials on how to trade were quite scarce. Besides the few resources, some traders discovered how the lack of a fresh perspective truly affected their trading. They would constantly feel that they were not learning anything new and that they were stagnating as a result. Whichever source they turned to, they would always see the same recommendations coming from traders who spent decades behind the desk. Some of the traders finally decided to put an end to their suffering after realizing how each piece of advice they applied never truly worked out for them no matter how collectively praised they were at the time. They eventually set off a new path – the path of rediscovery. They tried different methods and discovered a whole new world of possibilities which completely contradicted everything they had learned until that point. While this process did take some time, it was worthwhile.
Some of them now talk about having been hired by prop firms that were looking for their level of expertise and others are keen on sharing their knowledge and experience with large masses. Interestingly enough, the one thing that stands out in all their stories is the belief that forex education never improved, even after all this time. What beginners often have to deal with is the constant reiteration of the same concepts that inevitably lead to failure, and professional traders frequently highlight how alternatives exist. While researching, you should seek material that aims to make your trading easier and give you back your time, without having to conform to the opinion of the majority.
Reasons To Start Trading
Different people can have diverse reasons why they would like to enter the spot forex market. Some felt stressed working long hours, whereas others moved from another market to this one. A portion of traders feel that their base market cannot offer them the same quality of trading at all times, such as the example of the penny stock market summer standstill, and others simply desire to expand to another market despite having been happy all along, e.g. stock trader looking to learn about trading currencies. With such a diversity of motives and backgrounds, the focus should increasingly be directed at exploring the market and finding additional reasons to keep a positive outlook.
Ways for Traders to Stay Motivated
Whichever reason you have for starting to trade currencies, you should be aware of the fact that motivation is key. The essence of such transition, whether you are shifting from a typical day job or coming from another market, lies in a strong desire to dedicate your time to learning and developing as well as the readiness to constantly invest in your knowledge and skills.
Personalized Systems for Trading
Professional traders always highlight the importance of developing a personalized system, which basically consists of a set of rules, indicators, and money management skills traders should put together to follow and apply consistently. Such a system should tell you when to enter or exit a trade as well as incorporate mindset skills and abilities. By devising your own system, you will feel that you no longer need to put so much effort into trading as you did before because you will always know exactly what you need to do, thus eliminating the tendency to guess. Experts in this field have also shared how smaller time frames make it difficult for traders to put a system together, unlike using the daily chart which has remained their favorite after a series of testing. By regularly implementing a system you have created, you will make your trading experience increasingly easier, secure, and profitable.
Among various sources you can come by, you will find how a vast number of committed professionals in the spot forex market rely on the daily chart. Despite the existence of different time frames, using the daily chart to trade currencies has several benefits, among which is the ability to trade as little as 10 to 15 minutes a day.
Duration of Trades
Beginners are eager to find exact numbers and precise information, but sometimes the key to being successful is not the precision but letting go. By listening to forex experts, you will discover how some trades can take even months as opposed to some much shorter ones. Sometimes, the duration of a trade may be affected by what is happening at the market at the time as well, but some average time with regard to how long a trade should last simply does not exist. All trades will always run for as long as they need to is the message professionals in this field commonly tend to share.
Risk vs. Reward
Every trader should consider the risk-reward ratio before entering a trade and the ATR indicator has been massively praised for its application and effectiveness in this regard. Despite every pair having different volatility, we can still make adjustments and protect the trades we are in. Professional traders strongly advise the beginners in this market, as well as others, to take half the profit off at a certain point along with the trade because it will both secure the trade and protect your finances.
Exiting a Trade
The ATR indicator should be combined with an exit indicator so that traders would know what the best time to get out of a losing trade is, thus preventing the price from hitting the stop loss at, for example, 1.5 ATR (14). You will also find how stop loss is generally used as the last resort because the price rarely gets hit there under the condition that you are using a proper system. By having these figures, you can have a sense of what trading sensitivity to aim for.
Experts’ Typical Trading Day
Proper Forex trading allows you to have plenty of free time which gives you space to do other work-related projects, do sports during the day, or spend time with family. If you take time to learn a way in which you can trade up to half an hour a day, you will both have opportunities to obtain a profit and dedicate time to other activates that bring you pleasure.
End of the Learning Process
You may find how there are generally two types of traders – the ones who reached a certain level of success and feel like they do not need to invest any more in learning and the opposite type of trades who still feel the urge to learn and grow regardless of their expertise. Some of the most experienced individuals in this market would always advise you to never stop exploring new options just because you feel happy with what you have achieved until that point. Keep finding different indicators and settings which you will then measure against what you are already using. Remember how trading more frequently will not bring you more knowledge, or money for that matter, because every technical tool has proved to work better on the daily chart than anything else according to experts. Most importantly, do not settle for indicators or advice which would generate results that are not as good as the ones you have already produced yourself before.
Forex vs. Crypto
Many traders wonder about potential correlations between the two markets despite their fundamental differences. The first time people heard about the new and emerging market, everyone was drawn to give it a try. The initial craze over the crypto market was recognized by some professional traders as something they have already experienced with the penny stock market. The crypto market gathered enthusiasts with and without any previous experience, but the mania over how quickly the market was growing prevented them from preserving their investments properly, and so many people crashed along with the market. The story of crypto should truly serve as an excellent case study because very few people knew how to manage a trade or how to invest and almost everyone wanted to hold instead of sell. The same can be seen in some other markets today, such as gold and metals, but some traders still choose to go all in without adopting some intelligent strategies which can safeguard them against any unpredictable situations. Nowadays, many crypto-turn-forex traders have chosen to change markets due to the stability that the forex market provides.
Many traders attempt to forecast how the market is going to develop, however making such predictions is impossible. With bitcoin, for example, everyone keeps saying how it is the best or the safe-haven currency, yet when the market appeared to be crashing, this currency kept going down, so we can never know for sure. The crypto market appears to be stable now, but as with anything else, change is the only constant.
Actions that Make a Difference
Among all actions you can take, you should nurture a sense of curiosity as one of the most praised virtues traders should possess. With a plethora of educational materials, blogs, and videos traders can look up at any point, it has become extremely crucial that they always invest in learning more. This ability will prevent you from staying in a bubble, forced on by a vast majority of popular traders, which lets you believe that you can only choose between approximately a dozen options for your trading and that research is pointless. Luckily, there is always another way you can approach trading and, should you ever feel that what you are reading or watching does not really settle well with you, you can awaken curiosity within to help you keep searching for what you will eventually find relevant. Some professional traders of today criticize the lack of innovation and creativity which has remained present despite some obvious developments with regard to the market and indicators. What these successful traders did was invest in learning so as to be able to put together a unique system which now brings them a massive income. While time was a problem before because there were so few educational materials, now you can quickly learn from these individuals who are willing to share what they have learned.
The typical test professional traders carry out is backtesting, which consists of putting an indicator on any currency pair based on their own risk-reward ratio and assessing whether the signals it gives make them participate in a winning or a losing trade. The goal here is to obtain a rough percentage and understand how the indicator in question functions, so that you can stop testing it any further in case it underperforms. Whenever experts discover an indicator that successfully operates, they will add other indicators that are designed to eliminate the losses of the initial indicator. If the winning percentage has increased, such an indicator will be used in real-time because it will provide a clear picture one cannot get purely from backtesting, which excludes a number of factors traders normally face in real trading. Once you complete this process yourself and feel happy with the results, you can confidently continue using the indicator in your future trades.
Retail Traders Desiring Income
Retail traders working a day job will naturally be searching for the opportunity to start earning an income from trading in a manner that supports their everyday responsibilities. As they may not have a large quantity of time at their disposal, they are strongly advised to begin trading the daily chart. What is more, they should be wary of trading the 15-minute or the 5-minute charts because of the dangers of instant gratification and other hidden downsides. With the daily chart, however, they will not only have a much higher rate of success, but they will also be able to leave enough room for testing different tools and settings, watching educational videos, and developing their own system. The daily chart simply fits everyone’s lifestyle because it only requires up to 30 minutes a day of traders’ time.
Technical vs. Fundamental Divide
Some of the professional (technical) traders whose intelligence has been recognized by followers state that fundamentals should only hold about 1%, while the remainder belongs to the technical side. What they seem to stress is the fact that the fundamentally important aspects only boil down to the avoidance of news events that can somehow hinder the trade they are in. At the time of Brexit, for example, a vast number of news events kept coming out and the market’s reaction followed immediately, which is why this was a reason strong enough not to trade GBP at the time. From the fundamental standpoint, you should always ensure that whatever is out of your control is safely eliminated or mitigated so that it cannot affect your bottom line. The higher the number of such factors that you can eliminate, the better your system can do what it was designed for. If your system has been tested properly, you know that you can expect to get some extremely positive results.
Trading during 2019 Flash Crash
Despite the fact that the flash crash of 2019 was an important event that impacted many traders, not everyone was actually in trades that were affected. It is extremely important to remember that these sudden events always pinpoint the majority of people found on one side, be it long or short. What you should always bear in mind is that being the part of the majority is not the way to approach trading if you wish to nurture a long-term, sustainable vision. Interestingly enough, a number of traders who learned how not to depend on these mass movements stated to have earned a large profit right at the time of the 2019 flash crash.
Price Chart and Big Banks
Some of the first pieces of advice professional traders like to share include the knowledge of who moves prices up and down. Understanding how it is the big banks who direct prices whenever they react to what retail traders do is considered to be the fundamental knowledge. It is of utmost importance that beginners learn how to avoid the areas in the chart where the majority trades and the first step you can take is to stop using the tools that can put me in such situations. This is extremely important because indicators such as support/resistance lines, RSI, etc. will always give you a signal that everyone else can see, and while you may not know if it is going to be long or short, you do know that it will cause a large number of people to make a move. Whenever retail traders make a big move, so do the big banks and this is an excellent example of the factor you cannot control and should, thus, eliminate.
Another important piece of advice regarding price charts includes money management skills because their importance is believed to surpass that of having the best trade entries. This skill is more often than not one of the deciding factors that differentiate between extremely successful traders and those who keep losing. It is also a skill that almost no retail traders possess, which is why the majority of them fail so fast and so frequently. If you develop a system that you can consistently rely upon without having to think about it will be your main advantage, placing you right at the top. The third piece of advice regarding this particular topic revolves around the notion of trading psychology, which all traders should strive to adopt in order to learn how not to stop themselves from being successful in trading in the spot forex market.
How to Double-check Information
When traders look for the proof that some information is correct, there are always several steps to think of: they can talk to professional traders across the globe and discover evidence in their own research. The practical application and testing of any piece of information are of vital importance.
Client sentiment is responsible for the change in a price’s direction because the moment retail traders synchronously move across the chart, the banks will always redirect the price of the currency pairs the majority is trading at that moment. The rule typically involves the most traded currency pairs, i.e. EUR/USD, GBP/USD, USD/CAD, AUD/USD, excluding cross pairs where banks show little interest, which is an excellent opportunity to trade without falling under the big banks’ radar. An excellent example of this exception is AUD/NZD which immediately avoids the difficulty inherent in trading USD that typically draws most of the big banks’ attention. Moreover, as both of these two currencies are risk on and interest rates are high, there is no risk on/risk off discrepancy involved and they also need not worry about the stock market getting in their way.
Negative News Events
By trading the daily chart, you can trade only the last 20 minutes before the close of the daily candle. This way, should any negative news come out, there is a large chunk of the 24-hour period that traders can sit out, awaiting the news to correct itself. Even if such news comes out on the currency pair that you are trading at the moment, the technical aspect of trading can support and balance out any upcoming news events.
Time to Become an Expert
Some professional forex traders state that they needed approximately four years to reach the expert level of trading. Most of them started off during the times when educational materials were either hard to find or they were quite similar in terms of content, which is why it took them more time to put together a stable system.
Hours of Backtesting
At the beginning of their forex trading careers, experts state how they would finish their day jobs and spend a few hours each night backtesting and finding indicators they would later use as part of their algorithm, which was fully formed after approximately three or four years.
Special Trading Techniques
One of the most constructive pieces of advice you will rarely discover by looking at popular videos and posts is to eliminate the mental game from your trading. Just by developing a system, you can prevent yourself from having to worry about this aspect of trading.
Favorite Entry Setup
Professional traders always rely on their algorithms to tell them what to do next. However, some of them find cross pairs particularly interesting because they often evade news that could hinder the trade.
Active Trades’ Strategies
With regard to strategies to manage or exit an active trade, professional traders always take the profit off first and, then, they move their stop loss to their break-even point. Such an approach ensures that, regardless of the circumstances, they are still in a winning trade. They typically put in a trailing stop at a specific point and they also use an exit indicator which is an extremely useful tool. Exit indicators are designed to help traders leave a trade at the right time and, especially, before the price hits their trailing stop, helping them preserve quite a few pips on the way.
Great Trading Books
While there are a plethora of books on trading and becoming a successful trader, you will find how expert traders will mostly focus on mindset books, highlighting the need to adopt the right attitudes and perspectives. What they often point out is that it is crucial that novice traders learn about trading psychology if this is the type of career they want to do for the rest of their lives. Books on discipline have also been found very useful because they help you rest and refocus on what is truly important.
Retail Traders’ Main Task
Retail traders have been made to believe that there is only one approach that works, which blurred their vision and made them extremely short-sighted. One thing each retail trader should spend the next month mastering is discovering a myriad of other opportunities that can bring you much more success down the line. Retail traders owe themselves the chance to truly look at other options and then decide whether it is the road they would like to take. If you happen to be feeling tired from what you have been doing so far, you should know that there is a vast number of options, tools, and advice you have yet to discover.
Preferred Broker and Trading Platform
Oanda is one of the preferred platforms which professionals use for trading, whereas Interactive Brokers appear to be criticized because traders are required to confirm their decisions several times before they are acknowledged. In the United States, for example, there are only about four or five brokers that are available for use. Sometimes, traders cannot choose the broker they will be using because the company that hires them will request them to rely on their specific selection.
General Advice for Every Trader
All traders should always keep in mind that there are always other methods of trading that they can explore. Everyone should aim to learn different tools and strategies well before setting sail and understand that there are options available should they ever feel blocked.
As traders may at times feel as if it is their fault why their trading never seems to be as profitable as it is the case with other traders they follow on social media, they should be mindful of the fact that sometimes it is the lack of knowledge on better tools that prevents them from advancing. Relying on outdated tools and methods created more than 20 years ago for the purpose of trading in the stock market, for example, will naturally fail to bring you the results you are aspiring to obtain. The mechanics of the spot forex market are unique and should be, therefore, addressed as such.
The 30 topics we have covered today should serve as a brief introduction to trading currencies as well as a reminder that you should not blame yourself if your approach to trading is not working as you initially planned. Keep exploring other options and expand your knowledge on forex as much as possible. In addition, run tests to assess the tools you would like to use in the future, work on devising your own system, and discover ways to grow a trading mindset and money management skills until you perfect a unique approach to trading in the spot forex market. Lastly, accept the fact that following the majority of traders without any attempt at being unique will inevitably coincide with the big banks’ decision to move the price far from where you would like it to go.