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The Most Crucial Way to Save Time and Money when Starting your Forex Trading Journey

By Daniel Lummis, FX City

Most traders start their online Forex trading journey out the same way. They come to the internet and start learning and digesting all the information they can about trading, in a hope that after a few months of persistent learning they will be masters of the trade.

Soon they become overwhelmed by the sheer amount of information and subjective opinions being thrown around by all the “gurus”. They might learn a strategy from one self-proclaimed expert only to have it shot down by another self-proclaimed expert.

They will read books and watch videos until they finally take that plunge to open a demo account and start trading. Suddenly they’ve had a few winning trades, what comes next?

Time to put some money in to the markets

They put some money in to a live account. Here is where the trouble starts. Emotions start to get the better of them. They went in to this with a lot of trading theory, but very little thought out trading plan.

Despite what they were told about money management and planning being the most important thing when it comes to trading, this is the part they paid the least attention to.

Why is it not working!?

They learned a lot about indicators and triggers and entries and exits but no matter what they do their account just seems to keep going down!


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12 months in and their account is 50% down, they are feeling like it’s time to throw in the towel and call it a day. Maybe trading just isn’t for them, they might think. Or, “Trading is just for the con men with insider information”, they might say.

Then they go back to their day jobs and continue dreaming of how one day they can hundreds of thousands, even millions while sat at home in their jocks.

OK, so the above story may be a little extreme, but very true for a lot of people that try to get in to online trading. But it doesn’t have to be like this. There are tools available that can make this process a lot shorter and a lot less painless.


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Here is what you can do to make sure you stop losing so much money!

Not all aspiring traders do, but all of them should have access to a back-testing software. They are relatively low cost, especially when considering how much money and pain they can shave off the trading journey.

Back testing software’s allow traders to test strategies on real markets that have already played out. They can take a strategy and test if it has worked over the last 5, 10 or even more years.

When searching the four corners of the internet for potential trading strategies, traders will be bombarded with 100’s of strategies of which a very large percentage are not likely to be profitable long term.

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Know your going in to the market with a profitable strategy

Without back testing, there is no way to know if the trading strategy you have chosen is long term profitable. Forex demo accounts offer some form of testing without the pain of losing real money, but, the issue is that they must be tested on live markets in real time. Which is just too slow and if they are looking to test a longer-term strategy it will take weeks or even months before you exit one trade.

With a good Forex back-testing software, tens of years’ worth of test data can be generated in a matter of hours, or even minutes if they have an EA.

What to look for when buying back-testing software?

There are always things to look out for when buying a back-testing software.

1, Make sure they offer a free trial

Most reputable companies should be more than happy to offer a free trial. Test and play around with the software to make sure you are happy to use it.

2, Bear in mind the cost of data

Some software’s might fail to mention that you need to buy all the historic price data on top of what you are already paying for the software.

3, Make sure to check the reviews.

If the software is as good as the vendor says it is, there is guaranteed to be reviews online. A simple Google search “forex tester review” should return you the results you need. Just make sure to read the reviews of third party sites and not them of the website themselves.

Once traders are up and running, competently using a back-testing software that works for them, they are equipped with a tool that can ensure they have a profitable, strategy and the right money management before placing any live trades.

Being able to execute and stick to a plan is one of the most important aspects of being successful with forex trading. Knowing that the strategy is long term profitable beforehand inspires the confidence to stick to your created plan and pull the trigger when it matters the most, like pulling out of them losing trades early and letting those wins run for as long as possible.


Source: Flickr creative commons

What else could possibly go wrong?

Back-testing is not the holy grail and a guarantee that you are going to make money when you go in to the live markets. One thing that is not taken in to consideration when back-testing is human emotion.

Traders can make the worst decisions when their emotions get caught up in the heat of the moment when trading.

This is one issue that testing software’s cannot help to solve. Traders should make sure to study books and watch videos about trading psychology and how to deal with emotions during trading. This is another aspect that sometimes they might neglect during their learning period. New traders tend to find out the hard way when they start putting their hard-earned cash in to the markets.

The recipe to becoming a winning trader

Combine a solid tested strategy with good money management and a solid disciplined trading mind and you have the perfect recipe for a successful trader.

Article attributed by Daniel Lummis at FX City.

Fx-city.com offer free learning materials and trading systems for beginners and advanced traders alike. FX City offers free one to one training sessions to beginner traders looking to start trading forex.

 

 

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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