**If you have enjoyed reading this thread or have benefited from the information here, please don't just leave, please contribute**
My name, even though it's a witty twist on the currencies (Yen, Euro, Dollar!), it is also an acronym for:
Yielding | Earnestness | Self-Mastery
Yielding - This is to do with the practice of patience and discipline. When you want to make THAT trade, stop, pause and think. Yield when the opportunity isn't the best and wait for a better one. Also yield early when you're in an losing position (getting out quick!).
Earnestness - Being diligent in every trading decision you make and being sincerely zealous in improving your trading knowledge and ability with every single day.
Self-Mastery - Self control over yourself, over your emotions. Having complete control over your trading and yourself in every way possible.
Let's be honest; we've all had struggles with the Forex and we're all wanting to better our trading results.
The aim of this thread is to teach people how to trade successfully; not just successfully but also consistently. It's a brilliant place for beginners and seasoned Forex traders alike; that's my goal.
Forex has to be one of the most difficult things in the world to master for most people. To be successful you need to have a good methodology; a control of your emotions and psychology; a dash of common sense and a massive amount of self control.
What Traders Need to Know
When setting out in the Forex, you should be aiming to increase your knowledge and skill, not necessarily your account size. Invest into your trading education and set a solid, unshakable foundation on which you can build something which is long last. Be like the man in the parable who built his house upon the rock, it lasted when the winds and rains battered against it in the stormy weather. This is a picture of a trader who has built a strong foundation of knowledge and experience. Don't be like the man who built his house upon the sand, who's house came tumbling down when the storm came. This is a picture of a trader who isn't prepared; one who hasn't built their sound foundation.
I think every trader should learn all of the following, inside out:
- Learn to lose (taking a necessary loss)
- Be able to read charts fluently
- Skilled in technical analysis
- Skilled in fundamental analysis
- Understand how different markets affect each other
- Know what effect different news has on a currency and how important it is
- Understand the underlying factors which drive price
- Have 100% self control over yourself
- Able to think of trading systems
- Able to test trading systems, realisticly and not be biased
- Know how to manage risk
- Understands the importance of money management
- Know when to stay out of a trade
- Knows when to enter and exit a trade, and how to limit losses
- Able to master one's emotions and psychology
Converesely, it's also just as important for traders to know what not to do. See below what traders shouldn't do:
- Being too proud to close out for a loss
- Trading because of the buzz it gives
- Over-leveraging and putting too much risk on the table
- Closing out a winning position too early
- Trading with a small account
- Feeling you always have to be in a trade / over trading
In each of those points above there is a massive wealth of information to digest and to learn, and it's for that reason why trading is such a complex business. It's a learning process which will continue for the rest of your trading life; every true trader never stops learning.
Practice makes perfect, and trading is no different.
Forex is a Business: Treat it Like One
Forex isn't a place for gamblers; it's a place for traders; it's a place for business persons who don't see FX as an easy way to riches, but rather a business which you build consistently; on a solid foundation. If you don't see Forex trading as a business you're chances of success will be diminished greatly. So when you hear that 95% of Forex traders fail (I presume 95% do), I would say they fail because:
- Lack of common sense
- They're out of their depth
- They don't know what they are doing
- They're crushed psychologically
- They don't have a method
- They aren't treating trading like a proper, genuine business.
Look at it this way; Does the HSBC bank see trading as a fun way to make money? Of course not; they trade as it's part of their business. It's all about numbers and cold hard cash. This is how it's meant to be treated; as a business; so try to adjust your thinking and approach it in this way.
For New Traders / Traders Struggling
If you're new or if you're a trader who has been struggling, you must realise that 'Trading Isn't Easy'. If trading were easy, everybody would be a successful trader and everybody would be doing it! This is a zero sum game, and by that we mean money is moved from one account to another. When you lose money when trading, guess where it's gone? That's right, it's gone into my account! I'm just joking, but seriously, when you lose money, that money which you lost has gone into the account of another trader somewhere around the world. So understand what trading is; it's you against other traders; your skill against theirs. They want the money in your account and they're trying to get it.
Now don't get me wrong; Foreign Exchange is much bigger than market traders as price movement is also influenced by Central Banks, Business Acquisitions, Business Transactions and smaller currency exchanges such as when you change money to go on holiday, etc. All of this has an affect on price. But back to my point; you're against other traders, so realise that it's a vicious dog eat dog business. You need to be on guard and protect your account at all times so the thieves of the market don't dip their hand into your pot and help themselves!
Once you understand that, understand this - There is a LOT of money to be made in the Forex. Yes, believe it or not, even though you may not have made a lot of money, a lot of traders do make hundreds of thousands or millions of dollars a year trading.
But let's zoom out a moment and look at other occupations such as dentists, lawyers etc; Most occupations which demand a six figure salary also demand many years of training, every day, for often 5 years plus. Therefore if you have just entered this business thinking you'll be making lots of money in 3 months, 6 months, 1 year, then I want to tell you that those expectations are completely unrealistic.
You need to see this as a LONG TERM learning experience and a LONG TERM business, not a get rich quick scheme. If you think you'll make killer money after your first year of trading then I have to tell you that the chances are you'll lose all of your money in the first year; NOT what you want; in fact, the complete opposite to what your goal is! Be smart!
From my personal experience and from my experience with other traders, I have found that small accounts don't work. The majority of people don't have the discipline and self control to manage a small account. Of course, small is relative to the person, but all that matters is that the person's who's account it is believes his account is small.
If you think your account is small you'll be:
- Wanting to increase the size of it faster than is safe.
- Over-leverage to make more money per trade; therefore becoming over exposed.
For the amount of mental and physical effort which is invested in trading it's only natural that you want to have a high return on your efforts, but the only way you can do this safely is to have a large account.
You need to have an account size which you can trade lot sizes which you're happy with. If you NEED to be trading $1 a pip to be satisfied, make sure your account is big enough for that kind of leverage.
You need to be happy and satisfied with the value per pip which you are trading, and that value per pip needs to be at a sensible level compared to your account size for you to be successful.
Furthermore; You need to choose ALL, yes, EVERY SINGLE ENTRY very carefully, as every trade has the potential to wipe out a trading account.
If you're wanting to open an account with only a few hundred dollars I suggest you do so only with a micro account which trades contracts as small as 1cent per pip, and see this as a training experience in a live account; not to make killer money! Otherwise save your money and save up so you can open up a larger account.
What is a large account? - I have heard that brokers consider an account which is $5000 to be small and that first time traders who operate this sized account are likely to lose all of their starting capital. Traders who start with more than $25,000 are considered by brokers to have more of a chance. Ideally, this is the size of account you want to have as a base; $25,000 or more.
I know not all can afford this, therefore be cautious in any smaller accounts and know you're skating on some thin ice; just be aware of that reality.
To choose your trades carefully you need to have a plan, a method.
Don't trade with money you can't afford to lose - This is similar to saying, don't trade unless you have other streams of income which are supporting you, so if you do lose you're not relying upon trading profits to survive! Having the pressure of HAVING to make money from trading can have a detrimental effect on ones account as you'll make rash foolish trading decisions. That type of pressure can have mammoth effects on your trading.
On the other hand, when you trade with money which you're not relying on you will trade with a clearer head and a cooler demeanor.