Forex Trading is a very complicated activity, regardless of what common sense may say. It is indeed a shared opinion among a certain group of people that online speculative investment is a sort of toyland, where it's easy to get rich. This is clearly a prejudice, although the responsibilities should not be sought solely among the uninitiated but also in the advertising approach of some brokers, who portray a non-existent world to stimulate new registrations.
Forex Trading is therefore sweat and toil. It is especially so from the beginning, in fact, even before. The reference is to the
training path that all aspiring traders must undergo to arrive prepared for their appointment with the market. An intense, difficult journey. And not only because of the complexity of the subject but also because, roughly, it has to be done all in
self-taught mode. There are no trading schools, not official ones at least, and often the video courses of brokers are not enough to effectively and precisely orient
all budding brokers.
In this article, we try to clear up some of the fog of uncertainty, offering some advice to follow the path of study in the most complete and functional way possible.
Take All the Time You Need
The first lesson that a trading novice must absorb, and which he will carry with him throughout his trading career, is that, apart from some circumscribed exceptions, trading, and specifically Forex Trading, is an activity that requires calm, cold blood, rationality. And, therefore, time. It is also and above all required at the beginning, when one has to train.
So, if you intend to undertake a training course to become a trader, be clear about this aspect:
studying will take time. It's not like preparing for a simple university exam, but for three, four, five exams at once, with "internship" included (we'll talk about it later).
How long do you need to study? It depends on each person's speed. Certainly, we are talking about months, and at least a few hours a day. So the advice is to carve out significant time for study during your day. It's an essential prerequisite, impossible to disregard.
Read the Classic Manuals
The bad news is that you will have to face the study path on your own. The good news is that, out there, there is an impressive amount of content, evenly distributed across all possible and imaginable channels:
video courses, seminars, articles, blogs etc. There is really an embarrassment of choice. The first step to take, however, has a taste of "the ancient".
In fact, it consists of an in-depth study of the great classics. Actually, they are often not even focused on Forex Trading, and in some cases, they may seem unable to keep up with the times. However, reading them is essential. These texts are in fact able to offer a composite overview of the very essence of trading, a general overview. They are able to illustrate in a plastic way the dynamics of the market.
There are numerous great classics still in circulation. In this context, we will limit ourselves to mentioning three:
Market Wizards by Jack D. Schwager,
The Intelligent Investor by Benjamin Graham,
Japanese CandleStick Techniques by Steve Nison.
Also read:
- 10 Best Forex Trading Books
- 6 Best Sites to Study Forex Trading
- 5 Best Italian Sites to Learn Forex
- Top 20 English Language Forex Trading Sites
Attend Forums
Forums are often snubbed by beginner traders. This is a mistake, certainly not a decisive one (you can go on without them) but still capable of affecting the quality of the training. The truth is that
forums are an inexhaustible mine of information, and above all of information that is rarely found in books, video courses etc.
By browsing through forums, and perhaps participating in them, it is possible to get a hands-on feel of what it means to be a trader, that is, the practical problems that afflict those who attend the market. It is possible to explore the details of the trading activity, to breathe its atmosphere in a certain sense.
Of course, you need to understand what kind of forums to turn to. The advice to take into consideration is the following: attend forums populated by traders who have a level of knowledge far superior to yours but
not so superior. If you aim too high, in fact, you may even have difficulty understanding what you are reading.
Learn to Read a Financial Article Correctly
Actually, this kind of competence should already be well acquired long before starting to study to become a trader. Also because, if you intend to make a career in trading, it is assumed that you have if not the knack, at least a clear interest in economics. In any case,
if you are not able to 100% understand an economic-financial article, run for cover. The only way to catch up is, of course, to study. Specifically, to study some university economics textbooks.
There can be no doubt about why it is good to be able to perfectly understand a financial article: firstly, the terminology of the articles is the same, or at least similar, to that of the tutorials. Secondly, articles are essential for the purposes of good fundamental analysis. Articles contain reflections, data, perspectives etc. all material that a good trader - of course, if the source is authoritative - cannot afford to miss.
Learn Technical Analysis
Technical analysis is a fundamental practice in trading. It is an indispensable resource for
all traders, Forex and otherwise, experts and not, rich and not. And the reason is simple: it represents the only way to deal with uncertainty, to unravel that veil of mystery that shrouds the future of the markets. Thanks to technical analysis it is possible, if not to predict the price, at least to understand its direction with a reasonable margin of error.
Is technical analysis effective? Yes,
if you don't misunderstand its purposes. Those who practice technical analysis do not have a crystal ball, but only a probabilistic tool, which is based on statistics and the behavior that the market has assumed in the past.
So, learn to do technical analysis. It's a path within the path, one of the most difficult stages to complete. Also because the subject, in addition to being complex, is as... abundant as it can be. The indicators potentially worthy of study are numerous, and it is up to the trader, perhaps under the advice of some expert, to choose a basket suitable for his specific needs. A recommendation valid for everyone could be to favor, at least at the beginning, simple indicators.
In any case, the internet alone is full of fairly effective tutorials on the use of indicators, from the most complicated to the most intuitive.
Also read:
- Let's Discover Technical Analysis in Forex Trading
- What Technical Analysis is and How it Works in Forex Trading
- Online Trading, the 3 Key Elements: Analysis, Technique, Psychology
Learn Chart Analysis
Chart analysis is a branch of technical analysis. It consists of studying not so much the market as a whole, but the charts, and specifically the "visual" evidence that the chart itself shows. Also because, in a sense, the chart draws shapes and colors. The candles, that is, the basic element of the most widespread type of chart, the Candlestick, tend to reproduce patterns whenever the market behaves in a given way.
The good news is that
the patterns represent very reliable signals, which the trader can use to set his orders. Specifically, you need to verify that the chart is not about to form a pattern, because in that case, if the future is not exactly written, it suddenly becomes readable.
Learning to do chart analysis is not very difficult. However, the study is not limited to memorizing the patterns, but also the various exceptions that can result in false signals.
Learn to Read an Economic Calendar
The economic calendar is an essential informational resource. It is the tool through which it is possible to practice good fundamental analysis, although certainly not the only one. The economic calendar, specifically, lists the events that will take place during the day and that could generate an influence on the market, specifying degree of importance, previous data and estimates (and many other useful information).
Reading an economic calendar is much more difficult than you think. First, because the link between theory and practice is not always linear. It is possible that, in theory, the price reacts in a given way to an event, but in practice it reacts in a completely different way. Reading the economic calendar, therefore, means contextualizing and detecting the presence of any exceptions.
Reading an economic calendar is also difficult because the degree of automatic importance assigned to each event is simply a rough indication, and often does not correspond to the real needs of the trader.
So, before taking for granted the importance of events, check the role they can play in
your trading activity.
Here, the course of study should also focus on this aspect, on the ability to carry out this kind of checks.
Also read:
- Let's Discover Fundamental Analysis in Forex Trading
- Fundamental Analysis in Forex, Here's How to Start
- How to Find Macro Economic Data for Forex Trading
- Why Market Movers are Important
- Forex Trading: How to Choose Market Movers to Follow
Study Risk Management Techniques
It is one of the most complex phases of the study path. It is so for the importance it holds: Money and Risk Management are really able to save the trader's "bacon", and to guarantee him an extremely solid control of his finances. It is also because, objectively, the techniques that fall under these two disciplines are rather difficult.
In any case, at the end of this stage, you should be at least
able to size positions according to your needs, to predict, and even set, the maximum possible loss, to understand even before the trade becomes operational how risky the latter is.
Also read:
- How to Manage Risk in Forex Trading (Risk Management)
- 10 Tips for Good Money Management in Forex Trading
- 6 Money Management Tips in Forex Trading
- Money Management: Risk Control to Increase Profits
- Why Money Management is Important in Forex Trading
- Difference between Money Management and Risk Management
Practice with Demos
This is one of the very last phases. After a training path focused on theory, after a "classical" study (on books, with videos etc.), it's time to get serious, to test your skills. This phase can be compared to a sort of internship, a period of "real work" but with reduced responsibilities.
In fact,
XTB's demo accounts allow all of this. They allow, specifically, to do real trading, in the real market but with fake money. In this way, you don't risk losing even a euro. Almost all brokers offer a demo account, which - to tell the truth - can be used both to refine your knowledge and to test new strategies.
Perform Back Tests
This is the very last phase. To tell the truth, we are already out of the actual training path. Also because you don't perform the back test to perfect your skills but to achieve an exclusively functional objective and purpose. That is, to test a strategy.
What does the back test consist of? Simple, not trading in reality, in the present, but "in the past". You take as a reference the data of a specific period and on those you use the strategy. The basic principle is very intuitive: if a strategy has worked in the past, it will also work in
