Building a collection advices for newbies in Forex Trading

[tommy0921]

Hi all,

I've just started to learn to invest in Forex field for 2 weeks. This is a good way to earn money if we well understand about trading, tools, and strategies in Forex. As a newbie, I follow people instructions and create a demo at fxdialogue because it is said that the best way to learn Forex is open a demo account. I agree. A demo account helps me understand Forex better. Alike any other newbies, I still have not much experiences. Therefore, I create this thread to put advices and experiences in. Obviously sometime advices cannot be correct for 100 situation, but it helps us gain experiences. I really appreciate your advices, and experiences. Post them in, so we can make this thread become collection advices for beginners.

 

 

I start first, and if there is something wrong, please notice

 

1. As I said above: "Never start Trading without FIRST using a*DEMO Account"*.A Demo Account allows you to become familiar with trading procedures, such as placing Market, Stop and Limit orders without any risk. All dollar losses or gains in a Demo Account are imaginary but the

 

2. Start with basic trading knowledge. There are some people invest without knowing what they are doing. It's the worst thing human have ever made. We don’t need to have MA degree, 'cause even MA will lose sometimes, but we've better knew deeply about what we will do.

 

3. No one cares about your money as you do. Take 100% responsibility and never wait for brokers to take your responsibility.

 

4. 20 ways to stop losing money (I just want to put them in one thread, so people will see what they need without spend too much time to search)

http://indo-investasi.com/showthread.php/9224-20-Ways-To-Stop-Losing-Money

 

5. 5 Ways To Identify Fake Forex Broker Reviews

http://indo-investasi.com/showthread.php/5952-5-Ways-To-Identify-Fake-Forex-Broker-Reviews

 

6. The most important of all success principles

If you do what other successful do, you will eventually get the same results that they do. And if you don't, you won't! (For your information, see below)

 

7. Types of Trading Strategies (see below)

 

8. Demo vs. Live Account (Please help)

 

9. Don't confuse execution with opportunity.*Expensive software won't help you trade like a hedge fund. Pretty colors and flashing lights make you a more nervous trader, not a better one.

 

10. Don't project your personal life onto your trading.*Trading gives you the perfect opportunity to find out just how messed up your life really is. Get your own house in order before you play the financial markets.

 

11. Don't think that trading is fun.*The trading game should be boring the vast majority of the time, just like the real-life job you have right now.

 

12. 32 rules traders should follow

 

13. Different Types of Brokers (see below)

 

14. 20 Ways To Stop Losing Money

Edited January 16, 2011 by tommy0921

[tommy0921]

The most important of all success principles

If you do what other successful do, you will eventually get the same results that they do. And if you don't, you won't!

"Nature is neutral. Nature does not favor one person over another. The Bible says, "God makes the rain fall on the just and the unjust." When you do the things that other successful people do, over and over again, you achieve the same results that they do. It's not a matter of luck, or chance, or accident. It is a matter of law" (from Millionaire Dollar Habits book)

 

Some people say that the most valuable pieces of advice they have ever learned is to focus in on people who have already achieved what you're trying to achieve, and ignore all the rest. It's easier said then done, but it's good advice.

However…

They do not ignore all the rest. They learn from failures of all the rest. Warren Buffett learned from Benjamin Graham. Benjamin Graham failed to realize the potential of stocks in long-run.

 

Your situation will not 100% the same as successful situation in a particular period. You apply the way they do, you get 80% + experiences from failures of the others. You achieve 100% growth rate.

[tommy0921]

Types of Trading Strategies

Each of the primary trading styles has been briefly introduced below. They have been placed in order according to the time frame that the trader operates in when employing that strategy, from the shortest to the longest time period that the trader typically holds a position.

 

* Scalping*– a very short term strategy used mostly by market makers and speculators to attempt to capture the bid/offer spread.

 

* Day Trading*– a short-term trading strategy in which a trader liquidates all positions before the end of the trading day.

 

* Range Trading*– a short to mid-term strategy based on first identifying and then trading within a range. Involves selling at the top of the range and buying at the low end of the range.

 

* Swing Trading*– basically, buying low and selling high, often using technical analysis to determine swing points where the market is oversold or overbought.

 

* Trend Trading*– the most long-term of the trading strategies, trend trading involves identifying and trading the overall direction of the market, often until a reversal occurs. Trailing stops will often be used to protect profits.

[freddy]

Welcome Tommy,

I wish you success.

 

 

The most important thing, BEFORE looking for a trading strategy is to understand Money Management (MM).

 

MM helps you stay "alive", meaning that even if you loose one trade, a second and sometimes few trades in a row, the next one you are still able to place a trade.

 

Don't learn how to win money, learn how to minimise your losses.

 

Also, you are right, indeed, it is good to trade on demo but just the time to know how to use your platform of trading or for a new strategy you want to test.

 

It is better to use real money to feel the real deal! but don't be fool.

 

Don't put all your money in a real account.

 

Nowadays, you have microlots and can open cents account, (1 pip= 1 cent).

Just take it as seriously as if it was a $1000/pip account.

 

Even with that knownledge, you will blow your first(s) account(s), so it is better to put max $100 to $250.

 

If you cannot be profitable with micro accounts, of course, you won't be able to manage a bigger account.

 

Also, take your time, I repeat, TAKE YOUR TIME, forex market will be there tomorrow, so don't worry about rushing.

 

Learn, learn, learn. Indo-Investasi is one of the best place for that, you have wonderful people sharing everything.

 

Last thing, don't expect to be zillionnaire tomorrow morning, dream big but at a slow pace and you will get the moon.

 

Have a nice w.e.

freddy

[chrisbenjy]

Types of trading

 

* Technical*- Technical trading involves technical analysis, using trend lines and other tools, including indicators to predict where the market will move.

 

* Fundamental*- Fundamental trading involves evaluating the economy of the countries currency and determining whether it is strong or weak. This includes analysing economic growth, GDP, interest rates, inflation and unemployment statistics.

[tommy0921]

Thanks all you, guys

I really appreciate your advices and helps. I really need them

[tommy0921]

Hi all,

I follow instructions and create a demo at fxdialogue ... it is said that the best way to learn Forex is open a demo account...I

 

Hi,

I need your help! Currently, I have been playing demo at fxdialogue for nearly a month. I know that the road ahead has many impediments. I don't know how long does it take us (normally) to learn Forex by demo? 3 or 4 months?

There is an ideas that demo account does not help us in control emotion. Does it correct?

[freddy]

Tommy, read my post again, I have answered that issue, although keep in mind this is only "my" opinion!

[tommy0921]

At moment, I'm satisfied at what I'm doing. Take into account of your viewpoint, take me as an example, instead of prolong the time to play demo, I should start to go to live account at fxdialogue. Don't risk but lose some money will be better, I will use my head better because of the fear of losing money. Right?

[tommy0921]

32 RULES EVERY TRADER SHOULD FOLLOW

1. Never risk more than 2 - 5% of your current (not initial) trading capital.

 

2. Always use protective stops in each and every trade you execute.

 

3. Never average a loss as this can lead to disastrous outcomes.

 

4. Preferably you should always trade in the direction of the daily trend, holding a position against the daily trend should be done with caution.

 

5. Never enter or exit a trade without a good reason, you should have a well outlined trading plan and cross each signal out as it unfolds.

 

6. Never get in or out of the market just because you have run out of patience.

 

7. You should always see the market from a neutral perspective, be willing to sell as you are willing to buy. Don’t force your opinions on the market.

 

8. Don’t just sell because you feel the price of a commodity is too high or buy because the price of a commodity is too low.

 

9. Never cancel or move your stop from its initial position, the only exception is when trailing profits being captured.

 

10. Specialise in one currency pair at first, and when you get really good at it you can expand your portfolio.

 

11. As a new trader you should stay away from trading at news time because this can be very risky as the market tends to act in unexpected ways at this time.

 

12. Always look for signals on higher time frame charts as they provide more reliable signals with more room for errors.

 

13. Make your analysis with a top down approach, after confirming a signal on a higher time frame chart you should look for confirmation on lower time frames.

 

14. Never place a trade just because of a single indicator/ signal, always look for at least three to four events occurring at the same time to tell a story.

 

(to be continued...these information is collected from other sources)

As I said

Hi all,As a newbie, I follow people instructions and create a demo at fxdialogue because ... I create this thread to put advices and experiences in. I really appreciate your advices, and experiences. Post them in, so we can make this thread become collection advices for beginners.

Please discuss

[tommy0921]

32 RULES EVERY TRADER SHOULD FOLLOW

1. Never risk more than 2 - 5% of your current (not initial) trading capital.

 

2. Always use protective stops in each and every trade you execute.

 

3. Never average a loss as this can lead to disastrous outcomes.

 

4. Preferably you should always trade in the direction of the daily trend, holding a position against the daily trend should be done with caution.

 

5. Never enter or exit a trade without a good reason, you should have a well outlined trading plan and cross each signal out as it unfolds.

 

6. Never get in or out of the market just because you have run out of patience.

 

7. You should always see the market from a neutral perspective, be willing to sell as you are willing to buy. Don’t force your opinions on the market.

 

8. Don’t just sell because you feel the price of a commodity is too high or buy because the price of a commodity is too low.

 

9. Never cancel or move your stop from its initial position, the only exception is when trailing profits being captured.

 

10. Specialise in one currency pair at first, and when you get really good at it you can expand your portfolio.

 

11. As a new trader you should stay away from trading at news time because this can be very risky as the market tends to act in unexpected ways at this time.

 

12. Always look for signals on higher time frame charts as they provide more reliable signals with more room for errors.

 

13. Make your analysis with a top down approach, after confirming a signal on a higher time frame chart you should look for confirmation on lower time frames.

 

14. Never place a trade just because of a single indicator/ signal, always look for at least three to four events occurring at the same time to tell a story.

 

To be continued...

 

As I said

Hi all,

As a newbie, I follow people instructions and create a demo at fxdialogue because ... I create this thread to put advices and experiences in. I really appreciate your advices, and experiences. Post them in, so we can make this thread become collection advices for beginners.

Please discuss

[tommy0921]

32 RULES EVERY TRADER SHOULD FOLLOW

 

15. Once you loose an opportunity you should stay out and let the trade be. More opportunities will come

 

16. When holding a position just focus on the charts and price action, don’t pay attention to the equities window as this will only distract you from making logical decisions

 

17. Face your fears; don’t think about loosing when placing a trade. Simply put the trade on and let the possibilities play out. We “are” speculators after all.

 

18. Keep a trading journal where you record all your trades, both losses and winners. This serves as reference when analysing your progress.

 

19. I f a trade turns out to be looser, just forget it at that instant and move on to the next trade, as a trader you should accommodate the fact that losses are part of everyday trading, even professionals have losses and that they are only a bump on the road to success.

 

20. Don’t be greedy by trying to pick the exact tops and bottoms of a market, let your strategy tell you when and how to close a trade, and always be satisfied with whatever profit you bank from a trade (no profit is too small).

 

21. When holding/ initiating a position, don’t think about how much money you stand to make/ loose. Just focus on the task at hand and think about making sound decisions free from fear and greed.

 

22. There is no single trading formula in the FX market, always use dynamic strategies for different market situations, and learn to swiftly abandon a strategy/ close out your trade the moment the market stops doing what you expect it to do.

 

23. Never let a loss go by without learning from it, if you learn from your losses then it counts as tuition for a lesson learned, but if you let it pass without learning from it. Then it is indeed a loss.

 

24. Your trading plan must be followed with absolute discipline in order to succeed. The trading plan should be tailored to suit your personality, ability and resources. It should be YOUR plan and unique to your style of trading.

 

25. Maximize profits not the number of trades.

(to be continued...)

[tommy0921]

32 RULES EVERY TRADER SHOULD FOLLOW

26. Have a scheduled time specifically for studying the markets before making trading decisions

 

27. Do not move with the crowd or do what everybody else is doing because the majority (95%) are usually wrong. You should look to buy when the majority are selling and sell when the majority are buying. It’s the basic law of supply and demand “it is an exchange market after all”.

 

28. Never blame others for your losses, always examine yourself when your trading results are poor. Only by doing so will you be able to improve personally.

 

29. Never doubt your trading plan, always trust and have faith in it.

 

30. Price has a memory; if it did something at a certain level possibilities are that it will do it again.

 

31. When trading the news, don’t pay much attention to the news itself but rather the charts reaction to the news. The answers are always on your charts as the impact of that news event has already been incorporated into the chart long before the news announcement.

 

32. You are your biggest mentor, you MUST believe in your analysis and your decisions. Only by doing so will you be able to build the necessary confidence you need to succeed in this business.

[tommy0921]

Different Types of Brokers

- The first step in choosing a broker is finding out what your choices are. You don't just walk into a restaurant, knowing what to order right away, do you? Not unless you're a frequent customer there, of course. More often than not, you check out their menu first to see what they have to offer.

http://www.babypips.com/school/images/graduation/brokers.png

- There are two main types of brokers: Dealing Desks (DD) and No Dealing Desks. Dealing Desk (NDD) brokers are also called Market Makers, while No Dealing Desks can be further subdivided into Straight Through Processing (STP) and Electronic Communication Network + Straight Through Processing (ECN+STP).

 

What is a Dealing Desk Broker a.k.a. Market Maker?

Forex brokers that operate through Dealing Desk (DD) brokers make money through spreads and by trading against their clients. Also called market makers, Dealing Desk brokers literally create a market and artificial forex exchange rates for their clients. While you may think that there is a conflict of interest, there really isn't. Market makers provide both a sell and buy quote, which implies that they are indifferent to the decision of the trader.

Since market makers control prices, it also follows that there is very little risk for them to set FIXED spreads (you will understand why this is so better later). Also, clients of dealing desk brokers do not see the real interbank market rates. Don't be scared though, the competition among brokers is so stiff that the rates offered by Dealing Desks brokers are close, if not the same, to the interbank rate.

Trading using a Dealing Desk broker basically works this way:

http://www.babypips.com/school/images/graduation/dealing-desk.png

Let's say you place a buy order for EUR/USD for 100,000 units with your Dealing Desk broker. To fill you, your broker will first try to find a matching sell order from its other clients or pass your trades on to its liquidity provider, i.e. a sizable entity that readily buys or sells a financial asset.

By doing this, they minimize risk, as they earn from the spread without taking the opposite side of your trade. However, in the event that there are no matching orders, they will have to take the opposite side of your trade. Take note that different brokers have different risk management policies, so check with your broker regarding this.

 

What is a No Dealing Desk Broker?

As the name suggests, No Dealing Desk (NDD) brokers do NOT pass their clients' orders through a Dealing Desk. This means that they do not take the other side of their clients' trade as they simply link two parties together.

http://www.babypips.com/school/images/graduation/no-dealing-desk.png

NDDs are like bridge builders: they build a structure over an otherwise impassable or hard-to-pass terrain to connect two areas. NDDs can either charge a very small commission for trading or just put a markup by increasing the spread slightly.

No Dealing Desk brokers can either be STP or STP+ECN.

(to be continued)

Edited January 14, 2011 by tommy0921

[tommy0921]

What is an STP broker?

Some brokers claim that they are true ECN brokers, but in reality, they merely have a Straight Through Processing system.

Forex brokers that have an STP system route the orders of their clients directly to their liquidity providers who have access to the interbank market. NDD STP brokers usually have many liquidity providers, with each provider quoting its own bid and ask price.

Let's say your NDD STP broker has three different liquidity providers. In their system, they will see three different pairs of bid and ask quotes.

hgggggggggggggggggBidhhhhiAsk

Liquidity Provider A 1.2998 1.3001

Liquidity Provider B 1.2999 1.3001

Liquidity Provider C 1.3000 1.3002

 

Their system then sorts these bid and ask quotes from best to worst. In this case, the best price in the bid side is 1.3000 (you want to sell high) and the best price on the ask side is 1.3001 (you want to buy low). The bid/ask is now 1.3000/1.3001.

Will this be the quote that you will see on your platform?

Of course not!

Your broker isn't running a charity! Your broker didn't go through all that trouble of sorting through those quotes for free!

To compensate them for their trouble, your broker adds a small, usually fixed, markup. If their policy is to add a 1-pip mark-up, the quote you will see on your platform would be 1.2999/1.3002. You will see a 3-pip spread. The 1-pip spread turns into a 3-pip spread for you.

So when you decide to buy 100,000 units of EUR/USD at 1.3002, your order is sent through your broker and then routed to either Liquidity Provider A or B.

If your order is acknowledged, Liquidity Provider A or B will have a short position of 100,000 units of EUR/USD 1.3001, and you will have a long position of 100,000 units of EUR/USD at 1.3002. Your broker will earn 1 pip in revenue.

This changing bid/ask quote is also the reason why most STP type brokers have variable spreads. If the spreads of their liquidity providers widen, they have no choice but to widen their spreads too. While some STP brokers do offer fixed spreads, most have*VARIABLE*spreads.

 

What is an ECN Broker?

True ECN brokers, on the other hand, allow the orders of their clients to interact with the orders of other participants in the ECN.

Participants could be banks, retail traders, hedge funds, and even other brokers. In essence, participants trade against each other by offering their best bid and ask prices.

ECNs also allow their clients to see the "Depth of Market." Depth of Market displays where the buy and sell orders of other market participants are. Because of the nature ECN, it is very difficult to slap on a fixed mark-up so ECN brokers usually get compensated through a small*COMMISSION.

 

As I said

Hi all,

As a newbie, I follow people instructions and create a demo at fxdialogue because ... I create this thread to put advices and experiences in. I really appreciate your advices, and experiences. Post them in, so we can make this thread become collection advices for beginners.

Please add your points

Edited January 15, 2011 by tommy0921

[tommy0921]

20 Ways To Stop Losing Money

This is good for general trading, not specific to FX but rules are just the same.

 

Here's a reality check as we slam headfirst into the January markets. The vast majority of retail traders lost money in 2007 and will lose money next year, despite ample doses of education, enthusiasm and brilliant ideas. In fact, at least 80% of all at-home speculators will eventually give up and wash out of the financial markets.

 

How can you buck this enormous tide and make 2008 your most profitable year in the trading game? To state the obvious, the best way to start making money is to stop losing it.

 

In that regard, here are 20 ways to staunch the bleeding and get back into the winner's circle in the new year. Happy holidays, everyone!

 

1. Don't trust the opinions of market gurus.*Remember that it's your money at stake, not theirs. Listen to what they say, then step back and do your own homework.

 

2. Don't believe in a company.*Trading isn't investing, so you need to focus on the price action and forget the balance sheets. Leave the American Dream to Warren Buffett.

 

3. Don't break your entry and exit rules.*You made them for bad trades, just like the one you're stuck in right now.

 

4. Don't try to get even.*This isn't a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.

 

5. Don't trade over your head.*If your last name isn't Kass or Cramer, stop trading like them. Just concentrate on playing the game well, and stop thinking about making money.

 

6. Don't seek the Holy Grail.*There is no secret trading formula, other than good position choice and solid risk management. So why are you looking for it?

 

7. Don't forget your discipline.*Anyone can learn the basics of the trading game. Sadly, most of us will fail because of a lack of self-control, not a lack of knowledge.

 

8. Don't chase the crowd.*Tune out the groupthink and dance to the beat of your own drummer. Get out of the chat rooms and off the stock boards. This is serious business.

 

9. Don't trade the obvious.*Everyone sees the most perfect-looking patterns, which is why they set up the most painful losses. Simply stated, if it looks too good to be true, it probably is.

 

10. Don't ignore the warning signs.*Big losses rarely come without warning. Don't wait for a lifeboat before you abandon a sinking ship.

 

11. Don't count your chickens.*That delicious profit isn't yours until you close out the trade. Trail stops, take blind exits and do everything possible to get that money into your pocket.

 

12. Don't forget the plan.*Remember the reasons you took a trade in the first place, and don't get blinded by greed or fear when the position finally starts to move.

 

13. Don't have a paycheck mentality.*You don't need to get paid every week or every month, as long as you take advantage of the opportunities as they come. Classic wisdom: traders book 80% of their profits on just 20% of the days the market is open for business.

 

14. Don't cut corners.*There are very smart folks out there working full time to take advantage of your mistakes. Fight back by examining your results, updating your plan and finding working themes for the next session.

 

15. Don't ignore your intuition.*Listen to that calm little voice that tells you what to do and what to avoid. That's the voice of the winner trying to get into your thick head.

 

16. Don't hate losing.*The best traders lose money on most of their positions, so get used to the pain of losing. And there's a side benefit: the losing teaches more about winning than the winning itself.

 

17. Don't fall into the complexity trap.*Traders who can't see the market are looking for it everywhere except in the price action. In truth, a well-trained eye will find more profits than in a stack of technical indicators.

 

18. Don't confuse execution with opportunity.*Expensive software won't help you trade like a hedge fund. Pretty colors and flashing lights make you a more nervous trader, not a better one.

 

19. Don't project your personal life onto your trading.*Trading gives you the perfect opportunity to find out just how messed up your life really is. Get your own house in order before you play the financial markets.

 

20. Don't think that trading is fun.*The trading game should be boring the vast majority of the time, just like the real-life job you have right now.

[metalriff]

Take your trading money , minus enough for 1 case of beer. Flush the remainder along with any self esteem down the shitter and enjoy your case of beer. Wake up in drunken fog and pray your time in forex was just a bad dream. Best forex advice you will ever get.

[chrisbenjy]

Take your trading money , minus enough for 1 case of beer. Flush the remainder along with any self esteem down the shitter and enjoy your case of beer. Wake up in drunken fog and pray your time in forex was just a bad dream. Best forex advice you will ever get.

 

You forgot hooker money :P

[shunshi88]

Welcome Tommy,

 

It is better to use real money to feel the real deal! but don't be fool.

 

freddy

 

yes, even a micro lot will give a different feeling compare to demo account.

[wirefax]

Should I use when trading Forex - Technical or for Fundamental Analysis?*

[Jonathan Groff]

Hi,

 

Thanks for sharing a good piece of info. I must appreciate you for your efforts and all the points you have mentioned are really worthy and useful for the newbies.

[Forturama]

Thank you for your post.

 

Some times trading tastes like a drug... I had some problems also.. the most difficult part of trading is beating the beast inside you, not the market.

 

Self control is every thing.

[Forturama]

A must read book: "Trading in the zone".

 

The "bible" of trading psychology.

[fawaz79]

hi everybody