Are you new in the world of trading? How to start?
At the beginning, I recommend you to find out as much information as possible about trading. Some informations you can find on various websites and in some books about futures, forex and trading. At the beginning, it´s important to obtain mainly general knowledge and an overview about trading. What is important in trading and how markets actually work.
Strongly, I do not recommend you to open a new live account if you are a beginner and if you don´t know anything about trading and markets! In this case it is almost guaranteed that you will loose your hard-earned money and blow-out your account.
As well, I recommend you to obtain informations from various sources – look at more websites and skim through more books. Later, you realize that not everything that is written must be true.
Here, you have to use your own intuition, common sense and make your own judgment.
What to trade?
When I first began more involved in trading I didn´t know what to trade – stocks, futures, options or Forex. The main reason, why I finally choosed Forex was that in Forex you don´t need extra big capital at the beginning. In Forex you can trade mini-lots and micro-lots. (you need cca 1000$-5000$) In futures you can trade only the full lots (you need at least 10.000$ account at the beginning).
The second reason was that Forex provides great liquidity and it´s open 24 hours. So it´s no problem to buy/sell anything anytime you need.
What everything do I need for trading?
You only need an average computer with good Internet connection. Then your brain, your mind, a pinch of common sense and mainly good knowledge of markets. And then, of course, at least some capital to start with.
Is it possible to learn trading by self-study?
Definitely. I myself learned only from books and from informations that I found on the internet. But around the first year it took me before I ever found out who/what to believe and who/what not. There is a need to involve common sense and compare it in your head.
How much money do I need at the beginning?
It is possible to start with $ 1, but all credible sources tell you that the optimal minimum is at least $ 5,000. If you are really serious with trading , but you don´t have a chance to put so many at the beginning, I think it is possible to start with $ 2,000 (at worst with $ 1,000), but it will require enormous patience, because the account will grow very slowly . And also you need a huge discipline of follow proper risk- & money management and follow your business plan.
I would say that if someone starts with trading, it is better to save regularly every month some money and give them aside. Make a plan, how much money you will need to save each month to month as X had requested amount. And while you are learning, you will regularly save up your money. At least I did it so.
How long does it take before I start to be consistently profitable?
It depends on how much a person is dedicated to the study of trading, where he gain informations from and how much is he/she determined to go for his/her goal. In general it takes at least from one year to two or three years of study and practice of trading before one became consistently profitable trader. It took three years to me.
Which timeframe is the best for trading?
For beginning traders, I definitely recommend to start trading on the daily (D1) charts. It is much easier than trading on the five-minutes (M5) or even one-minutes (M1) charts. Daily charts are much clearer and much better for predicting people’s behavior. There are obvious supports and resistance. It is much better here to estimate the direction in which the market will go.
Lots of people think that for trading on daily charts it is needed to use huge stop-loss and thus risking a lot of money. This is not true. Everything can be set by using correct position-sizing.
But it´s clear to me that your broker will tell you the opposite – that trading M1/M5 charts is the best thing in the world. The smaller timeframe you trade, the more trades you make and the more money earn your broker.
Trading in such a small timeframe (minute, five-minute charts, and actually everything that is under one-hour chart) is a guaranteed way to hell – I speak from my own experience.
On the daily charts you set your pending order and go away. And in one, two or three days you earn money. For somebody maybe boring…
I admit, on the minute / five-minute charts you will experience real adrenalin and excitement. You just pay for that adrenaline and excitement something – probably you will blow out your account.
In addition, trading on the daily charts requires only about 10-20 minutes a day of your time. Just sit down every night to the laptop and go through all the charts you trade. If a buy or sell signal appears, you enter a trade and go away. You can continue living your common life. If the signal does not appear, you do nothing. You can go to read your favorite book.
What volume (how many lots) to trade?
For each trade I first determine where to place my (logical) stop-loss. According to its size (the distance from the entrance) I calculate the position and how much $ I want to risk on one trade.
Is it good to risk 2% of the account?
Everywhere you read that risking 2% of your account is the best thing. But it is not so true. It is much better to determine a fixed $ amount you want to risk on each trade. When you risk certain percent from your account then after a few losing trades it is much harder to get back again on the break even (zero). I explain it in detail in my book.
Which indicators are the best?
I use only two moving averages. I also use supports and resistance. That’s all. You don´t need more. There is beauty in simplicity.
Which broker should I choose?
Choosing a right broker is important. To some extent it depends on whether you belong to a group or undergoing profitable traders. Read more in my book.
Which currency pairs should I trade?
About currency pairs and CFD I trade, I am writing here.
Which books should I read?
About which books I recommend, I write here.
Is it better to use fundamental or technical analysis?
I use purely technical analysis because all the news and informations are already included in the current price. No wonder it is said that there is nothing older than yesterday’s newspaper. All messages that are in the newspapers or on the Internet are old enough and are most likely already included in the current price.
Does it make sense to keep a trading journal?
Definitely yes. Firstly, you have an unique overview of all your trades. You see your results in perspective, from the longer term view. You see the result of a series of trades. And it matters. In the longer term it is not about the outcome of any individual trade. Furthermore, it forces you to follow your business plan. And if the journal is kept in some spreadsheet, it provides you various statistics (if you subscribe to my e-book, you get my trading journal that I created in Excel and use it every day).
Do I need to have a trading plan?
The trading plan is essential. When you create your business plan, it means that you have in your head comparison, what you’re in the market goes. That you understand your strategy. You know where you enter the trade and where to get off of it, when you know that trade probably would not work. And get off when trade goes your way. How much $ you risk on trade. What do you do when something unpredictable happens.
Which software do I need?
You only need MetaTrader 4, which is free and offered by most brokers.
Which hardware?
It may surprise you, but I’m sure you will do any ordinary notebook or desktop computer. I trade only from my laptop. Then I have MetaTrader installed on my mobile phone and on my iPad. But I use it only when I’m traveling and I need to check it.
To trading the daily charts you certainly do not need more monitors. Rather, it is important to have good Internet connection.
When to open a real (live) account?
It is individual. But surely you need at least after one, optimally after two to three months of profitable trading on the demo.
It is necessary to use stop-loss?
Absolutely. Without stoploss you have absolutely no way protected your capital. Stoploss is the emergency brake, which protects you from sudden sharp market moves and throws you away of the trade when it is clear that the trade lose its sense.
Should I trade the market price or should I use pending orders?
I only rarely trade at market (at current price). In the vast majority I use pending orders. This has several advantages. First, I can in advance plan my trade – where I enter, at what price will I buy/sell, where I place my stoploss and where I take my profit. Then it is just simply needed follow your plan and not interfere in it. Such trading style does not require your presence, and it is absolutely stress-free and unemotional.
What is the most important thing in trading?
You’ll read about it everywhere, and it will sound like a cliché – but it is really true. In trading, the most important is patience and discipline. Having the patience to wait for the perfect setup, to their advantage to a trade that has a high probability that it will be successful and will end profitably. And have the discipline to follow your trading plan all the time.