The Musings of Faith

Hi Diane! Good for you! Always understand that people will always discourage and ridicule what they themselves do not understand. There are traders I greatly respect that discourage forex trading for many reasons and I just understand that they have a different vantage point. So if you are serious about learning to trade forex, and it sounds like you are, you will have to forge on! Find those individuals that are encouraging you and keep them in your corner. Ultimately, however, you will have to gain and grown your own confidence in yourself and your own abilities to trade successfully.

Now as a beginner, I highly suggest you open a demo account with any broker just so you can begin to watch price and look at charts. You also will learn how to cultivate your own analysis and trading style on this demo account and you need to do this without the added worry of loosing all your money. All forex brokers offer demo accounts so that potential traders can test their platforms, spreads, and execution. Though this is play money, I encourage you open the demo account with an amount that mirrors the amount of capital you have to trade with when you are ready to open your live account. That way you will have a better idea of how you can actually trade in terms of leverage, lot size, and risk.

Please DO NOT rush into opening a live account. I understand that you are not working but as a newbie trader, I can guarantee that you will loose all the money in your first trading account. We all do. It is a part of the learning process so I just do not want that loss to put you out of business before you even get started. I traded for several years on demo before I was profitable in a live account.

So once you have your demo account, you will now have to figure out who you are as a trader so that you can trade your particular trading style. Learn all you can about traders psychology and the psychology of trading. Your mind and emotions will be the last hurdle to your success because that obstacle kicks in when you are trading real money. It is easier to do this now more than ever with Twitter, StockTwits, blogs, and webinars. The very best traders are willing to teach their strategies for free and a fee. Follow different traders and give each strategy a chance. As long as you remain committed, you are sure to find a trading style that completely fits you. You will know when you start to become profitable in your demo account and ready to step into live trading.

Remember this all takes time, patience, and committment. Good luck to you!

This is a great question and is something most traders, I think, struggle with. I know I do. Often it is when I am rushing into a trade or feeling too greedy. My solution is this:

I use a fixed number of lots of the same size based on the percentage of risk I am taking. That percentage is based on my ‘margin used’ so it is largely dependent on the account and lot size. I determine my risk by the margin because once you exceed a certain margin threshold, your risk is hugely out of your favor. Especially as that position moves against you. And this margin is the sum of all trades not just the ones on a certain pair. So I find that no more than 3-5 lots per pair works for my risk tolerance since I only trade 1-3 currency pairs at any given time. More than that and I find that my margin becomes too high and my trading is now too risky (and, therefore, too emotional) regardless if it is a winner or loser. Not a great position at all. Find the risk tolerance using your ‘margin used’ as a guide.

If you have a bigger lot size on your losing trades, it sounds like averaging down and greed. If you have smaller lot size on your winning trades, it sounds like hesitation and fear. Try using a fixed number of lots of the same size and DO NOT EXCEED IT no matter how well the position is doing. This also brings another level of discipline to your trading.

Good luck!

Hello Yonatan! Thank you so much for your kind words! I am really happy to hear that my articles and tweets are of value to you.

If you have been following me, then you know that I do not like to make broker recommendations. Your choice of broker completely depends on your trading style. Different styles will need different characteristics from the broker in order to be optimally successful. I believe it is up to the individual trader to make that decision.

However, with that said, I know that researching and looking for a good broker is a daunting task. So my advice to you is,

1. Figure out the criteria you need from your broker so you can be successful with your trading style.
2. Start your search with this list of brokers.
3. Check out their website. If you like the broker, download the demo and see how you trade using their platform.
4. If you like the platform, trade with that broker until you are ready to open an account.

Best of luck to you and your trading! If you want to trade as a career, keep trading and keep learning!

No, I do not know them personally. Nice to meet you too :)

Yes. I think most traders (except the brilliant few) do concentrate on only a few instruments. It comes down to focus and experience. When you limit yourself to a few pairs, you increase the time you have to concentrate on the moves, price points, levels, and news events of that particular currency pair. That’s a lot of information to analyze and digest in order to come to the correct trading decision. You maximze your efforts and, ultimately, your success when you can concentrate all that effort on a few rather than the many. With repeated and concerted focus on one pair, you gain valuable experience in trading that particular pair. That experience allows you to really know a currency pair. The better you know it, the better you’ll become at trading it.

I would apply the same logic to timeframes. Limit yourself to studying the timeframes that fit who you are as a trader. You have to trade who you are. Again, the brilliant few can adapt and change the way they trade depending on what the market is giving trading both long term AND short term timeframes. I am not one of those traders. I trade very particular timeframes. If my few pairs do not present opportunities in those timeframes, I don’t trade. I will not switch and begin to trade another timeframe. I will not force it. I simply will not trade.

Limits on the number of pairs and particular timeframes also means, of course, that you will miss trading opportunities elsewhere. WHO CARES! I missed the entire 1200 pip rally in the EUR/USD and the 980 pip rally in the AUD/USD. I’m not concerned. I don’t trade those pairs. I haven’t traded cable much lately because it is mostly consolidating right now so the opportunities on my timeframes have been few. But I have been able to catch opportunities elsewhere so no worries! I only concerned with trading MY pairs well. PERIOD.

The ultimate number of pairs you trade depends on you, the individual trader. Start with 1. Trade that one pair so well that you know how it moves withOUT the chart. Meaning, you can look at the price and KNOW how the pair is moving. You get to that point, then add another. You can’t trade every single move on every single pair in the market. Pick your favorite pair and trade the hell out of it.

Nothing is wrong with you. Sounds like you need a more objective methodology to confirm your gut feeling. See, I think you know that your gut is not enough to form trading decisions. As a result, you hesitate and/or fail to pull the trigger. These other people that use your advice are probably making money because your are simply confirming what they are already see in their charts. Otherwise, they are lucky….and won’t last very long in the markets themselves.

Practice using unambiguous trading tools to determine the entry price for you and confirm your gut feelings. When you find the tool that works, stick to it and keep using it. Moreover, keep trading! Trade demo until you are comfortable trading real money and make the transition. The psychology is different when you start to trade your own money, as you may already know.  So if you really want to be successful, you will have to make money with real money. But keep trading! Nothing worse than fear in this business. Only continual exercise of your gift AND technical analysis in the actual markets to turn you from a terrible trader to success.

Hey! Thank you so much for your kind words!!

No I don’t currently coach students on trading at the moment. I have been asked this question before so I can say I’m thinking about it. I love to teach and I love to trade so we’ll see. Stay tuned.

Hey Mimi, thanks for your questions. Faith has become something like a pen name lol so no worries!

I went live 2 months after trading demo. And that was WAY TOO soon! I would never advise that. Inevitably, I blew up that account and several thereafter before putting down my ego and returning to demo. It wasn’t until I could really understand risk and how I use it and manage it in my trading before I could make the successful transition to real money trading.

There are many technical traders who do very well without the fundamentals. So can you be successful solely using technical analysis? ABSOLUTELY! As you trade you will learn the fundamentals and learn more about currencies, so just keep trading and staying disciplined to your rules. If you are successful doing what you do as you say you are, why change it? Too many times, we learn another’s approach because it works for that trader. So test new techniques in demo and if it doesn’t work TOSS IT. Most importantly, TRADE YOU! Much like the saying, “trade your style, not your mentor’s.”

I like your choice of “career” trader. Yes, I am a career trader. However, I am not yet a full-time trader. I think I am making a transition in that direction but I have interests and talents right now that I am blessed to do while trading. I’m enjoying life as it comes!

Best of everything for you in your trading :)

Lydia