Daily Profitability of Beginners in the Forex Market


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.

Daily Profitability of Beginners in the Forex Market 2

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.

Scalping with Binary Options

Trading with binary options is more tricky, but also more profitable for most of the trades one would consider. It’s just that beginners may panic more easily when in the wrong trade, and get into a losing trading spiral. On one hand, binary options like IQOption and 24Option would protect you against big losses in case there’s a bad breakout, and the scalping session is no longer valid. On the other hand, binary options will have tighter time limits, and may be misunderstood and mishandled by beginner traders. It’s a good idea to practice scalping forex, through spot forex first, then move onto binary or partially binary trading.

There’s No Single Perfect Way to Forex Scalping

There’s definitely not a perfect way to forex profits, through any trading method. But scalping is much better than the highly popularized day trading, and way better than news-based day trading. This is because day trading is far more confusing, and beginners are less likely to get it right. Especially in day trading news, because the news is not really some kind of binary event. It would seem as though news is a binary event, and markets can only go up or down. But in reality it is not! Market news is a series of many binary events, at least 3 binary events, because it’s about what the market expects, and whether the news will it be better or not. It’s about what the economic number is related to the last reporting, will it be better or worse, and it’s also about the binary event of whether the market news has already been priced in by the market, or not. So we can see at least 3 binary events. So the actual probability of predicting market direction right, based on the news, is not 50%, but rather a lower number, which can be between 50% and 12.5%. In the worst cases, it is 12.5%, there are 8 different possible price levels to be expected as correct market price, and the market will sweep wildly across all 8 price levels right after the news is released. It’s total madness, and this is why news day traders lose their money. Wise beginner traders stay away from news trading, and simply use news as a volatility indicator and nothing more. There are other methods and tricks for day trading, that they use, but they have nothing to do with classic news trading concepts. Because news does not hint market direction! And with that, it’s worth pointing out, that you can actually trade binary options on news release days, on the forex market, and make money from the extreme volatility, regardless of direction. It requires binary options of various expiry times, from 30 mins to end of day, but if the overall strategy is well selected, it can make money on most if not all binary trades, because of the extreme volatility.

Trading Wisely from Day One

Beginner traders fall into many traps, and many of them lose their money. But older traders also tend to fail in just as big numbers, and it seems their years of trading experience is not helping them out. Only a handful of traders make a lot of money fast, and among them one will find many beginners, around 40% of profitable and very profitable traders are beginner traders. These are people who think outside of the box, without being hindered by years of wrongful experience. Older traders tend to attribute their good trades to all kind of wrong reasons and wrong indicators, that’s why they fall into traps that are much more difficult to get out of. Beginners can see their mistakes very fast, and start from scratch. Whereas older traders have old habits, that they cannot easily quit. All in all, one can learn from beginners and experienced traders alike, but be especially careful of experienced traders, they may show you 100 profitable trades, claiming success because of this or that indicator, and these may be indicators that no longer work, or may have little to do with these 100 good trades.

The US dollar, a currency which has fooled more market analysts and experts than any other market ever has. The US dollar tends to fool forex traders too, because we all trade pairs such as EUSUSD, GBPUSD, AUDUSD etc. And the US dollar can ruin many of our trades because it can move in the most unexpected way possible. Beginner traders may not know this, but the US dollar does not always adhere to economics or technical analysis, even market analysts are fooled by this, all the time. Rather, the US dollar can suddenly move in the opposite direction that analysts and experts expect, simply because the US dollar follows geopolitics and international diplomacy. Things such as military interventions, missile tests, nuclear tests, or anything to do with the US military being shown as stronger, will cause the US dollar to rally, out of the blue, no matter how bad the US economy is and how bankrupt the US Federal Reserve is. At times of uncertainty and risk, investors will buy the US dollar. That’s why it’s important when trading currency pairs such as EURUSD, not to listen to analysts and economics experts alone, but to also watch international politics. This is an important tip to keep in mind, because many traders have suffered big losses, even wise old traders, because they believed too much in fundamental and technical analysis, but paid no attention to international politics, and the US dollar got them by surprise, and they were trapped in some losing trade for too long. You can trade much better if you treat the US dollar as a special currency, which can defy logic and economics at particular times.

As a final tip, remember to doubt the opinion of experts seen on the financial TV channels, and to pay attention to technical analysis first, fundamentals and geopolitics later, but just by knowing what to expect from the US dollar, it will have you covered in the case of a long or short EURUSD trade, so you will know what to do next. Technical analysis is important when done on the 4 hour chart, or on the daily chart. This is where the main trend can be detected. If you use too many time frames, you will be confused, so it’s better to keep it simple.