4 Useful Tips for First Time Forex Trading

Forex traders that are just starting out often find the process to be quite tough. Many have unrealistic expectations and hope to get rich in a relatively short period of time. But this is rarely the case with most non-educated traders losing their capital within the first three months of trading. For this reason, it makes sense to learn the basics and only start trading with real money when there is a fundamental understanding of the practices involved in trading.

Here are a few of the best trading tips for beginners:

Buy software

The first time trader will require a decent software program to make it possible to complete the trading activity. There is plenty of competition in the Forex industry, so most of the software options are free. It is worth researching the market and going with the highly rated package that is user-friendly and has a wide range of features.

Learn fundamental and technical analysis

The ability to analyze the basic and technical aspect of Forex trading is certain to benefit the long-term goal of growing the capital. Learning to read the daily to monthly charts can help with all types of trading activity. It is worth learning about things like resistance, support and trend lines, as well as the indicators.

Also, it helps to keep in touch with worldwide news to see to how a country's financial policies and events can have an influence on the trading market.

Use the different markets

When first starting out with Forex, many first time traders focus entirely on currency pairs because of the tight spreads and daily volatility. But, there are several other markets that are worth considering. Popular options include indices, energy futures, commodities, stocks and exotic FX pairs. It is practical to look at trading in several markets to avoid issues with over-trading and also to diversify the investment portfolio.

Write things down

The new trader is certain to benefit when able to develop a mindset similar to a small business owner. A successful business is certain to create the detailed business plan and conduct regular auditing and monitoring. Keeping a record of the day-to-day trading activity can help in many ways. Use a journal to record mistakes and achievements, reasons to close or open a trade, and funds being traded.

Keep referring back to the journal to analyze the good and bad trades to show where you can improve and extract more value. Also, the details of the good trades will help to motivate and boost your trading confidence.

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How Much Money Do You Really Need to Start E-Mini Trading?

To read some of the success stories I see being bandied about you should be able to start futures trading with $1,000 and have it transformed within a year to a sum topping six figures. I certainly am not saying that this feat is impossible, but I have never seen it done and have never met another trader who has seen it done. As a trader who is relatively new to the markets, the chances of taking a highly leveraged account that is undercapitalized and expecting anything short of a trading belly flop is delusional thinking.

I have written on this topic before and have since changed my mind on some of the ideas I previously presented. With added volatility, at least added volatility in a scalping sense, it has become difficult to trade with tight stops and widening stops ends up violating every money management rule that has ever been written. With a $3,000 account you could well end up risking 10% of your account on a spike or trading stops that exceed your trading plan's "at risk capital per trade" rules. I recommend risking 3% and no more than 5% on any single trade. In a highly random market it's hard to stay anywhere near those parameters with a small sized account. If you set your stops at the appropriate levels you have too much money at risk, and if you decide to go the "tight stop" route you can count on becoming the "stop-out king."

So, how much money is right to start trading?

I used to feel confident recommending $5000 to start an account and restrict your trading to the $5/tick e-mini contracts, specifically, the NQ and the YM. After some time has passed, I believe a more appropriate starting trading balance should be $10,000. The traders who seem to have the least worries about profit and loss tend to succeed at a higher rate than individuals in small account, and the added cushion in the trading account seems take the pressure off. Trading an undercapitalized account puts tremendous pressure on the trader to win. Pressure is something you don't need in trading.

Further, with a small account many novice traders aren't able to distinguish a day where profit may be hard to come by versus a day when the market is moving nicely and is reasonably predictable. A couple of poorly chosen trades in a tough market can quickly drain a small account and discourage a new trader.

In summary, you have the best chance of succeeding with an account of proper size which is, in my estimation, best pegged at $10,000. This is not to say that a trader with an account half that size can't trade effectively, but rather the added cushion tends to de-pressurize the early stages of trading long enough where some confidence can develop. Extremely small accounts are tough to trade successfully, and should be avoided. Just because the brokerage will let you open an account with $1000 doesn't mean you are on your way to a highly successful trading career, just the opposite, really.

Would you like to start earning 300% every week? So would I... yet you see this type of hype on many sites these days. I don't promise astronomical returns, but 25 years of Wall Street trading experience has helped churn out solid e-mini traders for 5 years. Come see me trade. Real trading doesn't lie.

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How to Trade the Market During the Summer When You Don't Trust the Price Action

There are few times during the year when trading is more frustrating than the summertime. The price action tends to be clipped and erratic and I generally lose any confidence that a move will follow through in a normal fashion. In short, traders tend to lose confidence in what are normally "automatic" setups because the market has trouble maintaining a consistent order flow in any direction. This loss of confidence in the market can make e-mini scalping a tenuous and exasperating time to trade.

To trade the summertime takes a change in your approach to trading; you need to become more selective in your trade choices and make a conscious attempt at scaling back the risk factor in each of your trades. In my experience, the market tends to slowly drift either long or short and then may spike one way or the other and then resume the slow drift. These are hardly optimal conditions for an e-mini scalper to trade, but with some forethought, you can make the best of the situation and post decent gains. Of course, my expectations for trading gains are lowered because of the adverse price action, but every now and then a highly profitable day can be had. In short, I tend to lose confidence that the market will show any follow-through on trades that can often be counted on to run in one direction.

Here are some of the techniques I employ while trading during the summer doldrums:

· Scale back your earning expectations so you aren't tempted to take lower probability trades which stand a higher chance of failure because of the erratic price action that often is part of summer trading. More to the point, I haven't hit many home runs during the summer months, but collecting a number of singles can be an effective trading technique.

· Scale back the number of contracts in your trading. This will help should you encounter some unexpected erratic price movement. Conservation of your trading capital should be more of a concern than high earnings.

· It is very difficult to find a trade that will run during the summer months, so you may want to take profits earlier than you might normally take. When you find yourself in profit be careful to manage the trade carefully and don't let the price backtrack and erase the profit.

· As I said earlier in this article, the price action tends to slow in velocity and the market tends to slowly drift higher or lower. Don't get caught in a drifting market on the wrong side of the trade. Exit a trade that slowly but surely moves against you to conserve capital. These slow drifts can last for quite some time and gradually take you right into your stop loss. Even the simplest trade can take 3 or 4 times longer to complete because of low volume. (If it is a low volume day)

I can't say that summer trading is a load of fun, but with some changes in your trading methodology and scaled back earnings expectations it can still be a moderately profitable time to trade.

The retail world is full of new "magic" programs that promise untold fortunes

with little or no effort. They generally don't work, which is an understatement.

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