We’ve all been a beginner at some point in forex trading.
How to trade forex for beginners? I can still remember the adrenalin rush the first time I created an account with a broker and watched the prices moving in the market watch panel. The live-ness of the market was intoxicating. My older self can now tell that younger version that such a flood of emotions is the worst possible state to be in when considering forex as a way to make money. But whether I would’ve listened or not is a question because I was already hooked.
If it really was possible for me to tell my younger self what to do (and not do) in those early stages of trading forex, this blog is exactly what I would say.
You’ll never figure out how to predict price direction so don’t bother trying to learn
Lesson number one. Price direction is unable to be predicted with any degree of enduring accuracy so forget about trying to. This lesson may even depress you because you’re probably thinking “Surely it’s possible to predict it?”
Nope it isn’t.
At least not for 99% (my statistic) of people. Maybe huge international banks can predict it, but if so, it’s probably only because they’re big enough to move the market anyway with their transactions. But other than that, if anyone tries to tell you they know how to predict the market with a greater than 50% accuracy, ask them for proof and watch them squirm.
Indicators are useless
All indicators that are regularly used to attempt to predict future price direction are useless and this is easy to prove. We have several very skilled software developers on our team and any of them can write the code to completely automate any trading system that uses indicators. No matter how complicated a trading system is, it can be converted into an automated system that can then be both backtested and live tested. And guess what? They all fail!
Every single one of them always fails every single time. It is literally like trying to drive on an unfamiliar road with your front windscreen completely blacked out, and all you can look at is the road behind you in your rear vision mirror. Even if you increased the size or quality of the mirror, or used your side mirrors you still can’t see where you’re going by looking in your rear vision mirrors.
All you can see is where you’ve come from, not where the road is going next. That’s exactly what using moving averages, MACD, bollinger bands and all the other tools that draw fancy lines on your charts are doing: looking in the rear vision mirror.
Lose your emotion
This sounds a bit like the title of a song and indeed probably is, but this is one of the first rules of how to trade forex for beginners you need to learn – to remove all emotion from everything you do in forex. Whether it’s being fascinated by the price movement on the charts, or watching captivating videos on YouTube about insanely successful traders, you have to learn to know the difference between being entertained and letting cold reason dictate your decisions. But removing emotion is much harder than any of us realize. It needs an entire book written on the subject. Whether you’re winning or losing in forex, it’s a highly emotional activity. My tip for curbing emotions is simple. Restrict your forex-specific screen time. Spend no more than 60 minutes a day actively engaged in anything related to forex. Our emotions get stimulated when we spend too many hours in front of our computers trying to “figure out” the forex market. Forget it.
You’re better spending that time having a life. Binging on forex related screen time won’t make you a better trader but it will make you (& probably your family) grumpy. If you had the discipline to restrict yourself to just 60 minutes a day actually in front of a screen engaged in anything to do with forex then you’ll keep your emotions much more in check.
Don’t try to “come up with your own strategy”
We all think we’re going to be the child prodigy who’s going to have a miraculous epiphany that will reveal to us a winning strategy & make us mega rich. None of us are. And right now, there are countless people all trying to figure out their own strategy. Why will you be the lucky one who stumbles on something that works – if it even exists? Literally millions of people have done this. There is no strategy that hasn’t been already thought of. Instead, do research about systems that already exist. Develop a strategy to “evaluate” systems. It’s better to use your time doing this sort of development than trying to come up with your own system.
So my advice for how to trade forex for beginners would be to ask questions like:
1
Is it trying to predict price movement using historical analysis?
Then never consider it.
2
Does it have live track record? If so for how long?
If no live track record, never consider it.
3
Are there obvious signs that the system needs to be adapted regularly for market conditions?
Regular adaption = an unstable system.
4
Does it use dangerous martingale or grid functions?
If so it’s guaranteed to drain your account eventually.
5
Is it specific to a limited number of currencies that it works on?
As soon as conditions change in the market it will probably start losing more than it wins.
6
Are you being attracted by flashy sales tactics? Is this the real reason you’re drawn to a particular system?
Don’t let your emotions dictate an investment decision.
7
Is it an actual system or just a training course?
Training courses mostly provide little or no proof that they work and are usually regurgitated information that can be found for free on the internet.
And finally, assume that 99% of all systems are useless, dangerous or scams. If you approach everything with this assumption you’ll speed up the process of finding one that works.
If something is free it’s definitely worthless
Whether it’s a free giveaway to get you to signup, or a free training course or tool or even advice, if its free then assume it has no marketable value. No marketable value = no ability to work as an investment for you.
Everyone is giving stuff away for free, and for one reason only, they want you to sign up so it’s easier to sell you something. The easiest targets for free stuff is people trying to learn how to trade forex for beginners. If a system is good enough to be sold on its own merits, it doesn’t need trashy sales tactics to promote it. Tactics such as offering something with some perceived value (but is almost certainly useless) for free.
The only caveat to this advice is that there are websites that will give you valuable information to broaden your understanding. Articles like this definitely have usefulness.
But don’t think just because it has a price it’s worth anything either
If a system is being sold for $99 or $199 then it’s probably not a very good system. The system itself will almost certainly be built on algorithms that attempt to predict price direction.
There’s a reason why so many systems do this, it’s because its very easy to build software that attempts to predict price direction. You can even do it yourself these days using free AI such as Chat GPT. Actually, your Chat GPT system will probably work just as well as a paid system.
If you have developed a good process for evaluating systems, then you’ll quickly see that most cheap systems break all the rules of a worthy investment.
The system we promote has a high purchase price but we know it does do what it is designed to do: earn profits in a safe manner.
Finally, think like an investor
An investor thinks differently than someone who wants to “make money” or “make profits” or “get rich”. An investor mindset is critical if you want to have a decent account size in a few years. The forex market is really an investors dream. It’s just that most people don’t look at it through the eyes of an investor and certainly not newbies trying to learn how to trade forex for beginners.
Where else can you make up to 100% return on an investment in just one year? Where else can you invest literally just a few dollars to start with? Where else can your investment be so liquid that you could transfer it back into your bank account within just a few hours?
The forex market offers all this and more to serious investors.
Think about this.
If you start with $1000,
Assuming you don’t withdraw any of your profits,
At a return of 100% every year & compounding,
You will have over $1,000,000 in your account in ten years.
Or over $2,000,000 in eleven years.
That’s how investors think.
