1. RISK INVOLVED
After 3 years of doing this, I strongly believe that this should be the utmost importance of all. Without it, trust me, your account is just like a time-bomb. A matter of when rather than how it will burn out. Of course you may not appreciate this at the beginning of your trading journey, but sooner or later you will know that trading successfully is all about prudent risk management. Without it, like I said before, all you need is a single mistake to burn out everything. One simple mistake... that's all. To experience this, just open a real account, regardless of how much you deposited in, risk everything in one single trade and hang-on to your losing position... just see what happen. KAABOOM! (though you may profited initially for the first few trades)
2. IT'S NOT A "GET RICH QUICK SCHEME"
Most (new) traders treat trading like a big casino where they can dump their hard-earned cash and turn it into a million dollar within 3 months. You may get lucky at times, but your luck will definitely running out sooner or later. Try as you may, but I can guarantee that you can never become rich quickly by trading. It takes time to become successful at anything.
3. TECHNICAL INDICATORS
These are the real instrument that you MUST understand before you trade. Regardless of what system or indicators that you choose to buy or apply, just make sure that you thoroughly understand what the indicators are telling, I mean the market behaviors in particular. There are just too many hypes out there telling you the short cuts of trading. Trading is pretty simple actually but to make it even simpler by simply buying or selling currency pairs base 100% of signals are very very risky indeed. Why, because there is no system that can fit 100% on every market's condition. Each system has its own advantages vs disadvantages.
4. FUNDAMENTAL INDICATORS
Just like technical, fundamental indicators have its own equal share on the market. Some traders even rely 100% on fundamental rather than technical in their trading decision. Talking about fundamental though, to me anything that creates fear or greed is something that worth for you to put your attention on. Why? Because we're all human. We have fear and greed and learning how to control and manipulate these two factors are something that is worthwhile to our trading decision. Fundamental includes political, geological and economic news, calendar as well as economic facts and figures. Easy said, anything that the country or bank leaders are doing has its own effect on the market. My point is, just pay attention and understand the sentiment accordingly.
5. FOREX TERMS AND JARGONS
Though these terms do not guarantee your profit but somehow you need to know them. Otherwise how do you call yourself a trader when you are blurred when people are talking about margin, leverage, spread and all those forex jargons? Got the point? You don't need to remember all but if you can come to a point when you can fully comprehend a report talking about risk aversion versus risk appetite, then you should be ok.
6. WHAT TYPE OF TRADERS ARE YOU?
Well, this is definitely going to take you some times before you can really figure it out. Are you a scalper or a swinger? What type of risk appetite that you have within you? Are you a wolf, a ship, a bear or what? Try to know and understand yourself first.
7. THE IMPORTANCE OF DEMO ACCOUNT
Guys & Ladies, demo account is a practise account that is crash-proof because you don't have real money in it. It is important though because it's like a driving range if you compare it to golf... A place where you start learning how to swing, hit the ball cleanly and drive it to distance. You need to keep your demo account alive regardless of whether you have a live account or not. This is the place where you check your strategy, counter check your temptation and so on. Yes it is easy to play demo, but if you want to listen to my advice, treat the demo like real and treat the real like demo... and tell me the result... That is one of my little secret indeed...
8. PSYCHOLOGICAL AND EMOTIONAL CONTROL
Are you a balanced person? If you can't control your temper, chances are you can't become a good trader. You need to be very calm, relax and steady during trading or otherwise most of your trading decision would be based on impulsiveness rather than logical and technical justification.
9. WHAT DRIVES THE MARKET?
The point here is to understand that the main driver of the pair prices (ie USD/JPY @ 84.00) are people. People BUY and people SELL regardless of where they came from, banks, institutional, retail etc. The underlying factors of buying vs selling is all depending on FEAR vs GREED... in which people buy when they feel optimist that the price will go up, and sell when they believe that the price will go down. Either way, no one is 100% correct because majority wins. Understand this first before you start learning in detail about Advance candlesticks, Ichimoku, Rising Star etc etc which to me, is less important. This is the most basic element and yet so many fail to appreciate the concept.
10. THE MARKET HOURS AND VOLUMES
The 5 sessions in a day that you need to pay attention to are Sydney, Tokyo, Dubai, London and New York. Normally what matters are mainly London across New York hours but I include Dubai as well as there are surprises coming from the Middle East countries that are worth for you to pay attention as well. Watch the volumes as well as this is a direct indicator of volatility on price actions that you may take advantage of. Compare these hours to your local time and mark them accordingly. The point here is that not all hours are tradable especially the Asian Session where normally volumes are low and price actions are pretty static.
11. HOW TO MAKE ENTRY DECISION?
Have a system or perhaps buy one if you need to. Study and understand how the system works and follow it dilligently. Base on experience, it is easier and more accurate to make a trade decision base on technical indicators rather than fundamental but you need to blend it well with market hours, news and fundamental aspects of the overall market sentiment. Only enter when you have no reason not to enter. If you are 50/50, either stay out or cut your risk factor to 50% than normal...
12. LEARN TO OBSERVE AND DO NOTHING BUT WATCH
Yes, this is all about patience and discipline. The reason behind this is simply to train yourself from being impulsive in making your entry decision. Definitely it is not easy but if you can master this one, the rest are just piece of cakes. Trust me, you will appreciate the market better simply by watching and analysing what is happening in the market.
13. YOUR TRADING HOURS
Determine your best trading hours in a particular day or week. If you have a family to take care of, just like me, you can't take them for granted by simply sitting in front of your trading station all day long. You need to go out and plan your time accordingly. Plan in advance so that you can minimise distractions during your trading hours... but of course... stay flexible.
14. TRADING TOOLS AND FACILITIES
A notebook, pc and a desk should be sufficient enough to start but somehow are not sufficient for you to make good decision with your entries. More screens will give you better perspective on the market's condition, especially the price actions on several inter-related pairs that you plan to trade. Invest a bit because it's worth it... perhaps one item at a time.
15. MARKET CONDITION
Ranging, Trending and Breaking. The 3 basic types of market movement. Each has its own advantages and disadvantages and I don't plan to elaborate them any further here. 60% of the time, the market is always ranging. 30% trending either bullish or bearish and 10% breaking out, either up or down. Learn how to identify market mode and take advantage accordingly. That's all. You may need different type of strategy for different type of market's condition.
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All in all, all these may sound too complicated for you especially if you are a complete beginner.
The fact is... IT IS.
But trust me, these things listed above are do-able and master-able, meaning that you too can and will grab the concepts provided you give enough time for yourself to learn.
I tried my best to simplify them. Though trading wise you don't actually need to remember all of these elements, but the fact is you need to know them, one at a time and master the ideas in a pre-determined period of time, say 6 months to 3 years for example.
Just imagine a pilot and a passenger of a Boeing 747. Are they equal in particular? Yes they do in terms of humanity and perhaps physical too. But thinking about the skills, training, experience, competency and responsibility involved... I believe no question is asked on who's who.
The pilots are lesser than 10% from the passengers and yet they are the one who makes money rather than the passengers. Does this sound familiar from trading perspective?
So ask yourself and if you get my point, unless you have the intention to become a pilot in this trading arena which is not easy from the beginning, you better spend your money somewhere else rather than keep on paying the pilots and hoping that someday you will be able to fly the Boeing by yourself just like you did in your PS3 or X-Box consoles.
Trust me, it's not gonna happen unless you go to a pilot school.
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