What Beginner Traders Can Really Do
Beginner traders tend to make many mistakes and jump from one currency market to another, which leads to a loss of focus and strategy. There are beginners however who do these things, and still trade profitably, because they admit their trading mistakes and limit their losses fast. It has been found that beginner traders who trade forex profitably tend to trade slightly longer term than most other beginners. They also avoid trading the news in real time, or any kind of fast trading where market momentum can fool them. There’s only one type of fast trading where a lot money is made, and beginners are successful, almost from day one. And that is scalping trading, which is fast, but no momentum is involved. The objective is to make many small profits, few pips here and few pips there. All in all beginner traders have one big advantage, and that is that they are not stuck on old, obsolete ideas. They are willing to test new theories out, and even if some of these theories or indicators are wrong, they can still handle the risk. Beginners are more likely to take risks than old traders, this is both bad and good. Too much risk can lead to total ruin, while not taking any risk at all, leads to missed opportunities. It’s not possible to make money in forex trading by not taking risks.
Beginner traders can do more, much more than one would expect. In fact, 40% of the best traders out there are beginner traders. These were beginners in trading, but had valuable skills in other areas of life, such as logical analysis, street savvy, the ability to assess probability, and many other skills. Forex trading can offer as much as $300 per day, on every well selected trading day. Any given strategy is only to be used on selected days, no single trading strategy works every day in the markets. We all tend to think in terms of average values, average amounts, but life is determined by probabilities, and so is trading. And distribution of probability is uneven, there is a lot of it here, and much less there. That’s why forex trading can offer $300 trading today, then 2 more days with no trading opportunity at all, then another day with $300 and so on. Don’t try to think of trading as a day job, in terms of average daily performance because it won’t work. Every strategy requires well selected days. And this is when profitability can reach very high levels.
Realistically Achievable Goals
Beginner traders can realistically make 10% to 20% profit, per month, on small to medium size forex trading accounts, such as a $5,000 trading account. Traders who come from a binary options trading background, or simply understand risk and probability, know how to apply this common sense in trading. They know that forex trading is all about probabilities, it doesn’t really matter if one is trading spot forex or binary options. When a trade goes bad and time is running out, it means that your trade idea was bad and it now has a zero probability of success. And in probability theory, all possible outcomes add up to 1, (100%), by having one probability tending to zero, it means that one or two other probable trades have a much higher probability of success. Beginner traders who trade forex profitably, understand this property of probability theory and put it to the test every day. If a trade takes too long to make a profit, it means that natural forces in the market are against it. And that some other trade has an increased probability of success. In the case of scalping, beginner traders use time limits and price targets to assess new and open trades. The objective is to make a series of small profitable trades, without staying on either side of the market for too long. In actual tests, it has been found that scalping the EURUSD during the quiet Asian market session, can generate a lot of profit, even on a $5,000 account, this profit can be $300 per day. While there are days where no trading should be done at all, if the trader thinks that there will be a breakout move. Scalping is easier in the sense that you don’t have to predict market direction on the daily chart, and you can afford to be wrong. The risk is in the breakouts, and these can be detected using refined time limit tests.
The above chart shows a quiet session on the EURUSD, this only occurs mostly during the Asian trading session, and especially on days prior to the release of important news relating to the Euro or the US dollar. Markets always tend to lose volatility on the days leading up to important news days. Especially on the last day they tend to be quiet, while on the actual news release day, volatility comes back and price moves wildly up and down, before some direction is found. All the scalper has to do, is establish a baseline, and then trade price deviations from that baseline, simply by fading the market price action. In most cases, the trades tend to make 4-5 pips each, which doesn’t sound like much. But with an ECN forex broker, and 100:1 leverage, each pip in EURUSD is worth around $10. Thereby each trade can make $40-$50, and beginner scalpers can make up to 20 such trades per scalping day. The realistic average expectation however, is around $300 per scalping day, and there may be only 8 such days in a month, that is still $2,400 of profit.