The practicing forex trader's blog is an exclusive section of the Zota Capital website, entirely dedicated to the regulatory discussion of the most pressing issues related to professional trading in the international financial market.
It is designed to streamline and structure into a single whole all information materials, knowledge gained, experience achieved and implemented trading ideas, as well as help to understand the essence of the psychology of modern trading, characteristics of payment systems, the basics of money management and much, much more.
For people who start their journey on the stock exchange, the concept of trading and "lottery" is one and the same. But by going into the details, you can understand that bidding is hard work. Success does not depend on luck, but on the ability to accurately analyze the market situation and adapt to it. Also, a lot depends on the psychological preparation of the trader, because it directly affects the decision-making. So let's dispel the misconceptions that have killed thousands of accounts.
Popular trading myths:
Trading can be compared to gambling.
Excitement is the main enemy of the trader. To trade without preparation, with the "lucky / unlucky" calculation is like throwing money away. Study the market situation in detail, compare the risks and keep in mind that not only economic, but also political and cultural factors have a strong influence.
Reading books about trading on the stock exchange is a waste of time.
The thoughts of people who have achieved success in the field of activity about which they write, who have gone from a beginner to an experienced speculator, a priori cannot be in vain. It is better to learn from other people's mistakes than from your own, this can be reflected in your trading performance positively.
Profits can be made quickly and effortlessly.
As we wrote earlier, there are separate components that predetermine the outcome of trades, and it takes a lot of time to analyze them, but simply calculate them. Those traders who have achieved success in business have come a long way of ups and downs.
Starting with a small amount, you can quickly increase your deposit.
Excessive greed has killed more than one trader. In pursuit of high income, you will most likely lose all funds, but you will understand the importance of adhering to the rules of risk management. For experienced players, the percentage of earnings is 10-15%, so let the fact that it may be lower for beginners does not worry you.
We have sorted out common myths about trading and why so many fail in the early stages. But this is only the tip of the iceberg, because in addition to the amount of information read and analysis of external market factors, the trader himself is an important component. Inability to control one's emotions, irrational actions, lack of critical thinking and other mistakes have broken more than one beginner or even a specialist.
It is possible to avoid failure - you need to understand the psychology of Forex trading, and you can do this as follows:
Overcome fear. Fear of starting trading, losing capital, not coping with excitement.
A common emotion among traders. As common as it is natural, because if you gather and analyze information about the market, your mind will tell you the likelihood of failing or hitting the jackpot.
Many, because of the internal struggle, do not want to wait and try to go all-in, considering themselves stronger than the system. But that is precisely why they lose, because they do not want to follow the market trend and wait for the right moment to enter a trade. And this is one of the important qualities!
Learn to adapt.
The situation on the stock exchange is constantly changing, and if yesterday the trader was on the crest of the wave, then the very next day he loses a significant part of his capital. Why? It's simple - I didn't get my bearings in time, didn't analyze the situation and ended up with nothing.
Be calm in a stressful situation.
By giving in to stimuli, both external and internal, by refusing to listen to rational conclusions, you risk destroying what you so carefully created. When the situation escalates to the limit, you just need to let off steam, and not follow the principle of "burning shed, burn, and hut", right?
Not only in their own strengths, but also in the fact that the situation will always be favorable. Evaluate yourself and the market soberly, otherwise the anchor effect may overtake you.
Investment asset quotes directly depend on the prevailing market sentiment. For example, in 2017, bitcoin reached a value of $ 20,000, and investors wanted to have time to buy it during a bullish trend, guided by their greed and unwillingness to miss out on profits. The following year, the fashion went away, and those who bought the currency at the peak price were forced to sell it when it was at the bottom.
“Learn from mistakes” - this rule is applied in trading as well, because there is nothing shameful about a mistake. Not only beginners, but also investors with ten years of experience make the wrong moves on the stock exchange and lose large sums.
Let's talk about common mistakes and what literature to read to minimize them.
Errors in trading.
More than 60% of traders lose investments due to simple misfires, which nevertheless lead to serious losses. Let's take a look at the top 8 reasons why stock market fails.
1. Little or no experience. More than half of the training material is based on the rule that trading is easy. But this statement is fundamentally wrong, and most beginners believe in it and are left with nothing immediately after the start of trading. Test your strategy with a demo account, make sure to keep costs to a minimum.
2. Inability to apply money management. Managing income competently is a basic skill of an investor, without it there is nothing to do on the stock exchange. Learn to calculate how much to use in the auction, keep track of expenses and do not spend the entire deposit on the first transaction.
3. Frivolous attitude. People are led by rumors about quick earnings and the fact that all actions are performed in terms of excitement. And then they wonder why they got the result exactly the opposite. Treating trading as a game is a serious mistake, fraught with unpleasant consequences.
4. Lack of a plan. Entering a game on the stock exchange without a well-developed strategy and hoping for success is a stupid idea. By calculating the steps in advance, testing them with a demo account, you increase the chances of getting a high percentage of the deposit and closing the trades in your favor.
5. Emotionality. Traders who panic or go into a rush after their first earnings do not stay long in the market. A cool head and a sober mind have ensured success for more than one investor, so keep yourself in control and watch calmly.
6. Small starting amount. Brokers recommend depositing $ 1000 in the account in order to improve the work of risk management. But beginners are afraid to start with such amounts, limiting themselves to $ 100-200. Therefore, even when closing a deal, the profit is not very large. The desire to hit the jackpot leads to participation in small transactions, and this drains the trader's budget.
7. Untested strategy. Using a plan that is popular or you have seen from another trader is not a reliable move. Choose an individual approach, before analyzing how effectively it will affect your income.
8. Only one strategy. The market situation changes daily, and traders develop the ability to adapt the trading plan with particular diligence. If a trader does not change or does not use several strategies in parallel, then he runs the risk of staying in one place, if he does not go into the red at all.
In order to get basic knowledge of the exchange game, you do not need to pay fabulous money for trainings where you will be given 0 knowledge. There are many free materials on the Internet, in which the details of trading are described step by step, how to draw up an effective strategy and with what amounts to enter.
We recommend the following books:
"Forex: from simple to complex". I.V. Morozov, R.R. Fatkhullin
"Exchange trading by trends". Michael Covel
"Stock magicians". Jack D. Schwager
"Common Sense Mutual Funds". John Bogle
"Memories of a stock speculator". Edwin Lefebvre
"Zone Trading". Mark Douglas
"Exchange. Game for money". Adam Smith
"How to make stable money on the Forex market". Courtney Smith
"World financial crises. Manias, panics and crashes". C. Kindleberger, R. Aliber
"Poker of liars". Michael Lewis
"The practice of stock speculations". Victor Niederhoffer
"Self-instruction manual for a trader". Brett Steenbarger
"A random walk down Wall Street." Burton Malkill
"Millionaire Traders. How to Beat the Wall Street Pros in Their Own Field." Ketty Lin, Boris Schlossberg
"Turtle traders". Michael Covel
Before taking the first steps on the exchange, read the thematic literature and sign up for courses (be careful when choosing). Conduct a comprehensive analysis of the possibilities, what methods of entry are available to you and how much you have at your disposal. Check out the common mistakes once again, try to minimize them - and then you will see progress in trading!
Trading has become so popular that it is already considered a classic work. Unfortunately, most of the novice investors do not study the basic information, so 90% of the accounts become unprofitable. Trading on the currency exchange is painstaking work with a whole carload of nuances. This article describes the steps that will help you get used to Forex and trade profitably.
The first steps of a trader
First you need to learn the terminology: spread, candlesticks, strategies, technical and graphical analysis, trading sessions, stop loss and take profit, etc. Also, analyze what Forex is and how they make money on it.
Decide which tool you will be working with.
• Currency pairs are the ratio of 2 currencies to each other. For example, EUR / USD is the most popular and stable pair. On the left is the main currency, and on the right is the so-called quote currency.
• Commodity market - this includes oil, grain crops, precious metals, food products, industrial raw materials.
• Securities are shares of companies (mainly CFDs).
• Indices - the average price of a group of shares, for example, the S&P 500, which includes 505 copies. The share price is summed up and divided by the number of group members.
• Cryptocurrencies - digital currencies that are also traded on crypto exchanges.
To begin with, we recommend focusing on currency pairs - they are more stable and require less investment. A good choice would be EUR / USD, USD / JPY or GBP / USD - the spreads for these currencies are minimal on the exchange.
Learning will be faster if you apply the knowledge gained in practice. To do this, we will open a demo account with virtual money. It will help you master the principles of Forex trading and train strategies.
How much profit you will receive directly depends on the choice of an intermediary. Each company has its own conditions: trading platform, spreads, commissions, number of instruments, leverage level, etc. In addition to the conditions, you need to choose a bona fide broker, and this is not an easy task. There are about 800 companies on the market, of which 90% are scammers. Unfortunately, there is no perfect formula for finding an honest broker, but a couple of tips will definitely help you.
1. Rely on ratings. Top 10 brokers are often considered worthy candidates, but don't believe everything. The rating may be paid, so check several resources.
2. Study feedback on candidates. The best advisors will be current and past clients of the company. If possible, try to contact personally and directly ask for cooperation. There are a lot of purchased reviews too, so be careful.
3. Call the broker or visit the office. Communication with an employee will make it clear the level of their professionalism and whether they want to divorce you. If a manager persuades you to open an account and promises mountains of gold for inaction, this is a bad option.
4. Check licenses. Look at the reseller's website for the license and check its relevance. To do this, just type in the certificate number on the official website of the regulator. It is better to find it yourself, because when you click on the link on the broker's website, you can get to a phishing website written by the company itself.
Be careful and attentive, because the state of your capital will depend on this choice.
Opening a trading account
When you decide on a brokerage company, open a demo account with it. In this way, you will begin to adapt to the trading conditions and the market in general. The demo platform will serve as a testing ground for strategies, analyzes and exchange tools that make life easier for traders.
When trading Forex, you need to follow the rules of money management and risk management. The transaction should involve no more than 2% of the capital. This part is enough to earn and keep the deposit. Observe these points on a virtual account to make trading realistic and develop a risk-free trading habit. Remember to analyze each position and improve your skills.
For the sake of curiosity, create a second account and try to neglect analysis and money management. This will help you understand the importance of these actions and get rid of the most common misconception that Forex is a lottery.