General guides on trading outline what you need to have if you want to have a career but will not solve problems every trader will face. The experience calls for mistakes no guide will save you from even if you are warned about possible setbacks. Reading about trading alone will not make you a good trader but knowing where to focus will inspire some ideas and probably spark the initiative in an open mind. This article will cover some trading elements typical for professional technical traders although it could be a guide for any trader type.
People who are yet to make a plan out of their trading attempts or experiments are always looking for a guide and could be lost in so many resources pointing to very diversified ways of trading and personalities. For such is forex trading, endlessly deep and yet very simple depending on what you make out of it. The common question is where do I start? Yet once you know your destination and basics understood, you need to pack for the trip. We will cover what you need to have to have above-average attempt probabilities on forex.
There are no shortcuts to becoming a trader, there is no substitute for experience so if you are looking for a guide to set you up and ready to go you may be disappointed. If you are looking for guidance on your determined long way of becoming a trader, get ready for putting the work before you even take a step into forex. Every percentage on your side has to be earned with careful analysis, discipline, and lots of ideas testing. Trading is fun and exciting, the part before that winning percentage above 50% is hard work, which is essentially the biggest part of professional traders’ activity. The difference between 50% sports better and 51% is extreme. If you are playing poker that 1% is also decisive in the long run.
Forex is the same long-run statistical or odds game, but with more complexity. When you do not have one of the must-haves, such as optimal money management, 50% trading is not a very slow way to account default but a very fast one. Once your odds are 55% and you have all measures in place, the system, you can be called a pro. Wherever you trade, you are consistently winning in the long run. Casinos typically ban such players after they realize they have a system, luckily forex does not have anyone above your head. Sports betting with a 55% system can also be a career if you have enough capital to work with. That 5% is a big difference you need to work for. Some prop firms dare to say you can do a coin flip decision making for every trade direction and have optimal money management to have some success on forex. Yet it is likely you would need a lot of time to have any benefit out of that system.
Have a guide in your eyesight as a reminder. Having a physical presence of such a guide affects your mind subconsciously, you will have all the details in your head without reading it again. The whole setup you make will be in your mind because the memory of it will refresh every time your eyes see it. It is so easy to get off track, you will forget an important step that makes 1% odds in your favor. This trick will keep you sharp especially when you are new to trading coping with so many factors. Now let’s dive into the guide and know there is no particular ranking to each of the elements. All of them are important and give you the edge.
Having a structure. There are three names for this structure. Money management, risk management, or account management. It comes down to optimize your risk, positions sizing, when and why you are putting that capital percentage at risk. A rule set that will guide you so you do not stray from a good decision but with bad risk management. You can be the best, high percentage trader but without the money management to keep your losses in control you do not stand a chance. A structure technical traders follow for their money management is very strict, based on indicators or additional measurements (typically volatility) that define how much their position sizes are going to be for that trade on that currency pair at that moment. Whatsmore, they will have a structure on how much to close after their trade has progressed. So it will be a mix of pending orders, rules, measurements, and fundamental factors.
Emotional control. You will develop your money management to the point it is worthy and on the pro level. It will increase your odds to endure the long game and retain consistency. Piece by piece your money management will leave no cracks but all of it is for nothing without emotional control. Developing this element could be the hardest as it is tied to your personality which is already defined. You now need to change your habits with an adverse effect on your account. First, you need to recognize them and then create methods to “bend” them so they do not stay in your way to profitable trading. Prop firms like to start with personality tests so they can tell right away what emotional control flaws you will likely have when trading. Most people do not have this element, the stress is too high or habits too deep.
The emotional control level is easy to spot. People who complain, rant, conflict, are the loudest and probably most present on social media. It is easy to understand their emotional control is nonexistent, and are consequently unsuccessful traders. It is logical to conclude their comments or advice are not worth taking.
Forex psychology subjects are not popular unfortunately because people focus on technical or analysis thinking this is the main part of trading. Luckily, you now know trading is a holistic project. Take interest in other pro traders’ management structures once you find them, and build on that. This step will take you to the pro level very quickly.
Your next development point is finding your target time frame. For some prop traders, the daily timeframe has advantages over other standard timeframes. Your selection should be based on your personality but here is what is considered for the daily time frame example. The chart is slow-moving, one candle represents 24 hours price movements. This means you have enough time to react and prepare your next move right before the end of the day session. It is also stress friendly, you do not have to monitor the market, just focus on other things during the day, and see the results at the end of the session.
Also, prop traders think the daily timeframe is better for trading. News events are absorbed better, do not have to worry or wait for certain trading sessions, and it is even easier for trend following. The transition to the daily timeframe is harder than moving from, for example, 15M to hourly. If you like the thrill of action during the intraday moves over the easy-going and to some better performance on the daily, then this is the timeframe matching your personality. Again, as trading is a holistic project, your timeframe selection will also mean different strategies, emotional control, money management, and so on.
Trade entry system. This part of trading is the most popular. Traders want to improve their odds by creating a system for trade entries, exits, and staying out of trading. Finding things that could increase your odds is fun but sometimes the fun can cloud the importance of other elements. However, the hard work of testing and backtesting your interesting finds is rewarded by having a high percentage trading system that stays with you forever. Such a system should be universal, strict, that does not leave you second-guessing any decision. Some prop firms like to stick to the KISS method, Keep It Simple, Stupid. Overcomplicating your system with too many indicators or prerequisites creates diminishing effects.
More often than not, the simplest trading entry systems are very simple but strict. As you develop your system, try to stay original. If you are using the MT4 platform, you may find many made systems by other traders. Plugging these into your MT4 might look like an easy solution so you do not have to work on your own but you will find there are no shortcuts to forex trading, this system will probably not fit your personality or more likely not be profitable. Still, taking some elements out of it you think would fit yours is one of the best ways to create custom high percentage technical systems. Additionally, understand that eliminating losses is as important as creating good entries.
Avoid or accept what you cannot control on the market. You cannot foresee the price action after the news event. Even if the trade direction is logical according to the report result, the market will not obey logic. This is an uncontrollable risk we can avoid. Avoidance cuts the losses we make out of these moments where our odds are lower than usual. Consequently, this brings our odds higher. If you do not know by now, there are actors on the forex market that move the prices, these are the big banks mostly. We cannot control or know how they will react.
The risk out of the most important events can be avoided simply by not trading before them. Create a rule set to manage this risk, it is quite enough to avoid trading 1 candle before the news announcement if you are trading on the daily chart. Pay attention to the most important events, like Brexit, elections, NFP reports, and so on. Recognizing the periods or environments where many unpredictable factors can mess with your trades is paramount to increase your odds. Just play where you can win.
Having a source for support. Trading can be lonesome, if you are following and working alone as most of the traders, you may feel you need some clarification on the particular structure you are trying to implement. When you apply to a prop firm, you can easily evaluate them by how supportive they are. Providing a structure without support is not going to get you moving forward. When you do not understand an element in the system, you are missing out on part of the high percentage trading you need. Now, there is a thin line when you need support, and when you abuse it.
Every professional had or still has a mentor. Mentorship will help you get to the pro level fast but when you rely on support on every problem, you become dependent. You will not know how to manage alone once the support is gone because you have not developed a trading problem-solving mindset. Your trading is at risk of becoming a disaster, you panic when you lose the support you once had and make terrible trading decisions as a result. To avoid this, ask for support only when you really need it when you have exhausted all other sources and no one has faced the same problem (unlikely) before.
There is another positive side of having support or belonging to a trading community. Every trader will face losing streaks, doubts, and other psychological issues. A prop firm, a community that provides support in such times is invaluable to traders. They come out of much better traders with a steel mindset, beneficial to the prop firm and the trader. On top of all this, belonging to a community or a prop firm will generate a lot of ideas, tools, and strategies out of which some could be critical to your winning odds increase.
After all, know that your guide should contain specific instructions covering these general areas, especially if you rely on technical analysis. Each of these areas is covered in separate articles.