How is this too short
I've been trading Currencies, commodities and other financial instruments for the past 2 years.
I've been learning by myself without the help of others and I've got to a point where I am comfortable trading live accounts profitably.
I am nearly at a stage of financial freedom for myself and my family through Forex.
While I am a confident in My trading skills, I am a human and I make mistakes, we all do, And most importantly to become a successful trader you must be able to learn from these mistakes and improve on them.
Most recently I turned a $300 micro account to a $20,000 account in the space of a few months (http://www.myfxbook.com/members/JeremyW ... ws2/132232
BUT . . . . I did wipe that account in the space of 2 weeks. This article is here to help you turn your capital into something much higher but to also warn you on some common mistakes and some that caused myself to lose 20k In a few days.
How to make it:
You are reading this because you like the idea of making a lot of money. But you have to know straight away this is not an easy job. It takes a lot of time investment and patience
Everyone has a different style of trading, this is one of the most important things you have to find about yourself. Are you a Scalper, Swing trader or Position trader?
Personally I am a mix of scalper and swing trader and so I feel I can best describe how to trade with these mindsets.
Primarily very short term trading (any where from 30 secs to 15 mins) where you take advantage of small price movements, You could trade anywhere up to 25 times a day. You would normally trade On M1 or M5 with finding the overall sentiment of the market by looking at M30 or H1.
For me I combine a use of support and resistance through trend lines, psychological levels (i.e. 1.4000 On E/U) and supply and demand. With technicals Such as RSX, Stochastic and Trix in overbought zones.
As you can see in this example EUR/USD had fallen earlier showing there was some downside momentum and so when it caught A bid back to nearly the high. It coincided with resistance and was in overbought as shown by stochastic so You would short.
In this example it took 15 minutes for my TP to be hit and this was a successful trade.
Swing trading is generally longer term from a few hours to a few days. Due to a longer time frame you would expect a larger Target and stop normally around a 70pip TP and 35 SL , once again giving you a 1:2 Risk:Reward ratio.
With the same set-up of Oscillating Technicals (RSX, Stochastics etc.) and trendlines you can adapt the very same trade rules for a longer timeframe typically H1, H4 or D1.
On this example EUR/USD was on the back of a rise over a few days, therefore when we saw a pull-back and stochastics were oversold we longed, We did this twice achieving many pips with limited risk. We then noticed that when we rose we DIDN'T make a new a high therefore momentum was weakening and because of this we shorted when stochastics were overbought.
These trade took a few hours to complete but the reward is greater with still limited risk.
Both trading styles can varied to each individual preferences and through these set-ups I turned $300 to $20,000 in the space of 3 months. But it has the potential to do much better if you refine the system, As it is no holy grail.
After a few months of trading these systems, it takes all of 30 secs to decide the future direction of the security and it saves you much analytical time as time = money and we are bred to save money.
How to get Rich from trading:
Trading profitably is one thing but sticking to a solid system is key. Therefore my rules where to risk no more than 1% of my account at any time, and with risk:reward I could be making 2%-3% per trade while on risking a fairly low amount.
This is the most important thing - Compounding - a mere 1% per day (assuming there are 250 trading days/year) would equte to a $1000 account being worth $12032.16 through the power of compounding profits. Now if you were to average 2% a day you would make $140,267.69 in one year. All from as little as 14 pips a day. The key is consistency, once you've got this, you are sorted.
How to stay Rich from trading:
Here are the most important and most common ways for people to lose money:
Over trading - taking more trades than necessary (once you've made your 1-3% a day STOP!!
Over leveraging - You need only a leverage ratio of 20:1 to do this method, there is no need to use more, you are just risking more and you could be tempted to average down.
Losers average losers - A famous saying from one of the greatest traders of our generation Paul Tudor Jones. Basically Don't add to a losing position. You were wrong and you have to accept defeat to the market. There is no point risking more money.
Trading Around news - If you are not a fundamental analyst, just stay away from scheduled news. (a good calendar can be found at www.forexfactory.com
) Sometimes unscheduled events can be announced but there is nothing you can do about it so move on.
Trading on mobile devices - If you have a smartphone with the ability to trade on, DON'T. Monitor your trades or close them but never open them without the ability to access full charts or news feeds.
Anger trading - also referred to as revenge trading. Where you are annoyed about losing 1% so you trade again but now you are risking another 1% so you aren't sticking to your rules of 1% and you are emotionally affected and therefore your trades aren't as good and you are more likely to lose.
Remember ALWAYS use a stop loss. regardless, protect your capital. A good common method is to use a trailing stop which can be especially useful on the swing trades, therefore as opposed to using a fixed TP, have a 25 pip trailing stop and momentum can normally take it quite far safely.
Taking your first trade:
Many people out there will tell you to practice with a demo account before trying live money, My view support this but with a demo account there are no psychological or emotional blocks for your trading and you'd take risks you otherwise wouldn't and this is where a demo account has it flaws. I recommend opening a small live account, depending on your circumstances anywhere up to $100 so you can trade micro-lots ($0.01/pip) and get a feel for what it is like to win and more importantly lose.
Finally after a few months of demo and micro trading, you can move to a real account. However don't put in money that you can't afford to live without or would change your lifestyle (i.e. don't re-mortgage your house to fund your trading).
It is one thing to win trades but it is an entirely different thing to make money consistently, and by following my guide I hope you are more aware about different systems and problems traders commonly have. If you have any questions just ask me!