THE REALITY OF FOREX TRADING...

Apart from my day job as an Electrical Engineer, I've been trading my ways up and down since 2nd January 2008 with so many improvements and lessons learned along the way. Most of these lessons are rather painful experiences that I would have avoided if I knew them in advance.

The fact is, most of the things that I personally encountered are actually written in the first book that I read about trading (ie. Trade for A Living by Alex Alexander) and yet, still the tendency of repeating them exists within me especially if I am not being careful enough.

Depends on whether you want to believe the facts written below or not, but those are the one that I truly and personally believe about the forex trading as of my current experiences. I would re-visit these points a year from now and see whether there are any changes to these opinions.

No 1. The forex market is highly volatile especially during major news release and London Session (3pm - 12am Malaysian time). Mainly due to high volume and liquidity with plenty of market participants inclusive central banks, institutional traders, tycoons as well as retail traders like us.

2. There are so many factors that drive these price movements inclusive economic data, stock exchange activities as well as geopolitical sentiments. Easy said, the market moves accordingly to what the majority believes. Period.

3. It's all about buying and selling. We buy when we believe the price would move up and sell when we believe the price would move down.

Those are the 3 keys... but the points that I really want to share with my viewers are:

1. Just like in any field, there are no easy ways and shortcuts to be successful in forex trading... nope... just don't ask again. Those adverts that you saw in your emails and websites are purely gimmicks. I repeat... they are purely marketing gimmicks. They want you to buy and that's it...

2. In order to be consistently profitable, you must time your entry well. It's all about getting into the right trade and profit shall come accordingly. But of course, we always ask how? This is where you have to choose or come up with your own trading rules and system.

3. Discipline and patience are the 2 most important foundations in your trading. Without these you will never survive in the long run... never ever... I really mean it...

4. Risk management is the key to everything, since there is no one who could get it correct all the time. No one! So, though correct entry is vital for your profits, but then proper risk management is the one that will protect you from catastrophic fall-downs during any bad trade.

5. The market strength is imminent. No question about that. You got to trade with your eyes open and see what is happening in the price movements, regardless of what the market analysts said.

6. You cannot be an average trader if you are really serious about trading. Average traders lose money almost every time.

7. Be smart but do not be too smart. You have to develop a 6th sense in reading the market's direction. Like it or not, you got to trust your own analysis and take your chances base on calculated risk coz there is no way you can tell for sure how the market would move exactly... no one can... and don't trust what the analysts said blindly... they are occasionally wrong as well...

8. If the robots or EA's can do all the tradings, Wall Street would have been emptied from humans or floor traders. The point here, automated trading is possible, but not the best... a combination of both could work well but still manual trading is the best.

9. Anyone can easily give up if they are not properly educated about the market.

10. So many thought that trading is easy, in which anyone can make quick bucks in short time. It is true though, especially on the opposite site of the equation. Base on my own experience... it is not...

11. Self control is the real steering wheel to your trading activities. Learn to control yourself and you will trade well. Don't rush in taking any position in the market... chances are you will regret them...

12. As humans, we all make mistakes. But as traders, any stupid mistake is costly so you must leanr and strive your best in minimizing these trading mistakes.

13. Ride your profit, only with stop loss at breakeven. If you are already in the 100++ region in profits and you plan for a 500 pips gain, fine... but move your stops accordingly, at least to the breakeven point or higher within the profit region. There's nothing more frustrating than to see a 200pips plus trade later turn to a loser... at least don't lose even if you don't gain anything.

14. Do not hold your breath too long under the water. When you're wrong, think again about the feasibility of that trade - is it worth it to hold? are you still trading according to your plan? - and decide quickly as the market do not wait for your decision. Unless you have a strong reason not to pull out the trade until certain level, the best is just to exit and forget about it. Wait for the next trade setup to appear. Personally, this has helped me a lot with my trading and one of the hardest thing to program under my subconcious mind.

15. Always trade with stop loss set upfront, but of course not too small. My typical is between 50 to 100. Yeah some old timers had adviced me not to use stops as brokers would hunt these stops especially during thin markets. It could be true but just imagine when a sudden unexpected news hit the market that change the course of direction significantly... though your margin may be able to survive until it becomes -2000 pips (wow!), but think again... would you be able to wait for the price to come back... it could be days, weeks or months... most of the time, it's not worth it... after all, you will only become a trader who waits for accident to happen. You may be safe with zero loss for quite a long time especially if you're trading small and correctly, but then don't forget it only take one significant mistake to destroy it all... just don't do this...

16. You must keep yourself updates with the market's condition at all time since the market is highly dynamic. Things that you thought impossible to happen could happen within seconds in forex trading and something that you don't know could hurt your account badly.

17. Risk small... since this is the real key to avoid trading emotionally coz you know no matter what happen, you will still be comfortable with your balance even if you got the next one wrong...

18. All new traders must learn to position their trade accordingly to their account size. Otherwise, 1 trade is all you need before you can kiss goodbye to the market.

19. Learn to read fibonacci levels as well as identifying previous highs (resistance) & previous lows (support). Newbies always put unrealistic targets and one of the reason is due to their negligence to these levels. When you set your target blindly purely based on wishful thinking rather than technical reasonings, chances are your wishes won't come true. I can guarantee you..

20. Always trade with the broker especially during thin market conditions. Try looking at the chart from a higher view and try to locate at which price would most stops are located. Another easy way is to read the SSI (Speculative Sentiment Index) provided by dailyfx. When the ratio is significant, chances are you can easily guess where most stops are being placed by the retail traders. But of course, this is better done with scalping strategy.

21. Last but not least for now, this is very important. Don't rely on your trading signals blindly no matter how good it was in the past or claimed by the owners. To me, any trader must first understand the basic concepts of supply and demand. These two's are the one that really moves the market. When market is in consensus, it is really easy to trade with one way direction with some minor swings due to profit takings and repositionings. But when the candle is forming a 'doji' with significant tails at both side, the best way is to stay out or scalp your way carefully. Signals are helpers but they could not guarantee anything. The reason I am highlighting this is because there are simply many occasions when the signals are so clear and convincing, and later turned into whipsaws... In laymen words - You thought it surely happens this time and put bigger money into risk and later frustrated when later you discovered that it was a false signal. So beware!

Hmmmm... What else? I guess that's all for now...

Sounds too much to share and yet too little space to explain...

Anyway, just to let you know that my journey in this trading world has been very very interesting so far especially when good money is made along the way... and to see some of my friends are doing the same things with their accounts after sharing some thoughts and knowledge that I wrote here somewhere...

Till then... enjoy your weekend...