I came across this article and thought it was worth posting here....
Please note: I have no connection with fx-pro and therefore cannot vouch for their reliability as a broker
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Advice for Novice Traders
1. In order to become a successful trader, you must have sufficient risk capital, the loss of which (or parts of) will not completely destroy your morale - you must be able to handle this ordeal calmly and this should not effect your lifestyle in any way. Your mind should be on the market, not on your finances. You must concentrate on the task of trading, and must remain calm, in order to make the proper trading decisions. You should never use the last remains of your finances for trading - the responsibility and the pressure would be too great, and your mind would stray towards your finances, and not towards the market situation, thus greatly increasing the possibility of mistakes.
2. Don't rush to open a real account after only a few days of practice. Practice for as much time as necessary for you to feel confident on your own. Do not compare yourself to other traders - just because it took them a certain amount of time, doesn't mean you don't need more. Your primary goal in this practice is to develop an individual trading style or technique such that, at the very least, your next week's trade earnings are not less than this one's, and your monthly earnings should increase every following month. Only after achieving this result, should you open a real account.
3. When the amount of winning trades surpasses the amount of losing trades, and your account balance is increasing, you have achieved a positive result in trading. However, if you have 5 losing trades for $2000 total, and 1 winning trade for $3000, that is nothing to brag about since you probably made it through only by luck, or by the fact that you took an insane risk to use the maximum number of lots for your trade. You should never depend on luck . Not on the market - eventually your luck will come to an end.
4. Its not enough to achieve the above results on your
demo account. It is equally as important to understand why it happened, and to develop your profit-making individual trading style. Intuition is very important, but basing your trading decisions solely on intuition is unacceptable.
5. Set up strict limits for your losing trades, so that you don't lose more than you can handle. These limits should be within 3-10% of the total sum of your account, depending on its size. If the market starts going in the wrong direction, don't try to think of excuses why you shouldn't close that position - as soon as the losses reach your set limit, immediately close the position. Even if the market starts going in the right direction 5 minutes later, you have eliminated the risk of it not turning around. You will make such trading rules, so that you could trade by them, not try to go around them - you would only be hurting yourself if you did.
Remember that if your account contains less than $3000, you should not trade using more than one lot. If $3000-$5000 - never more than two lots, but only trade two lots only if it is looks safely in the current market situation. If you have $10,000 on your account you may trade two lots, but never more than three. If you follow these rules, you will considerably limit the risk factor. Trading too many lots at once would be dangerous and unwise.
6. One of the most deadly mistakes a trader may commit, one which shall destroy everything, is when the trader (after already losing $200 on a position) begins to think of excuses not to close this position - perhaps the market will suddenly turn around and move in a favorable direction? The trader keeps thinking of this, and doesn't have the heart to close the falling position, waiting until this happens. The market does not do any favors for anyone. Eventually the trader will be forced to close the position, with losses of $1000, or even greater. Not only will the trader lose money, they will lose morale too. They will lose confidence in themselves and their decisions. The reason for committing this mistake is simple - greed. Losing $200 doesn't hurt your opportunity to not only make up your losses, but also make additional profit. Losing $2000-3000 in 1 or 2 trades, you completely destroy your opportunity to earn further money! In order to avoid this trouble you must follow a simple rule - never go over the risk limits you set for yourself. Close your positions immediately when your losses reach these limits!
7. The less money your account holds, the less money you can lose in a trade, the greater that trade's value is to you. Because of this, you should avoid opening a real account with $1000 - its just not enough, because just like a "spy" you can't afford to make a mistake, you don't have the right to make a mistake, and a mistake is fatal. On any market, there is no such trader, even the most experienced, which hasn't ever made a mistake.
8. Mistakes and losses are an unavoidable part of any trade on any market. The sooner you learn to accept losses in such a way, the sooner you will begin to earn. You should not blame yourself, others, or the market for your losses. Your losses are in no way related to your reasoning abilities. Your task is to calmly analyze your mistakes and to not repeat them in future trades. You should not jump from joy after winning $800, nor beat your head on the wall after losing $200. The less you let emotion get a hold of you during trading, the better your ability to see the true market situation and to make the right decision. It is vital to develop a cold-hearted lack of emotion, and to treat winnings and losses as just numbers - not money. Understand that traders don't learn from their winnings - they learn from their losses. When every loss is perceived as one step towards your next winning trade - you are on the right track.
9. The trader's greatest enemy is not the market, putting the blame on which is the same as blaming nature. The trader's greatest enemy - greed, impatience, lack of control over emotions, insecurity in oneself, and a self-centered nature of the trader. You must never open a position simply because you get bored and want to do something, because you haven't opened a position in a while. There is no norm as to how many positions you should open in a given period of time. Even if you only open one position on 2-3 days, but that trade earns you $600-800 - you are on the right track.
10. Keep a diary, where you will describe the conditions that led you to make the trading decisions that you did. Write about the market events which influenced your decisions to open or close a position. After every trade, analyze it and write down the result in your diary. If you made a profit, it is important that you understand and remember your flow of thinking, which led you to the right decision - market events happen often and new news may replace old news, so you will eventually forget what happened unless you keep track of it yourself. It is even more important to understand why you lost. There are really not that many mistakes that amateur traders commit, and if you can understand them all, you can learn not to repeat them.
11. Reading the opinions of others, base your trading decisions on your own analysis of the market, and your feel for the market, which you will eventually acquire. If your prediction matches someone else's, good. If not, that’s not a problem either. However, if upon seeing such a disparity, you start doubting your analysis, it is best not to make the trade on your real account - only on demo. If you are confident in your decision, go ahead and do it - one of the predictions will be correct. If your prediction is not the correct one, find the fault in your analysis.
12. Always follow the ancient and universal rule of the market: cut your losses as soon as possible, and hold your winning positions open as long as possible. There is more to add: never, under any circumstances, allow loss to occur in a position which has been making profit. It is better to close it all together without profit if the market suddenly turned in the opposite direction, rather than allowing a profit to turn into loss. That would be just stupid.
13. If you suffer a loss, don't try to immediately open a new position to "get revenge" on the market - you are only making your situation worse. Only if you see that the direction you have chosen for that position was totally incorrect, then it would make sense to quickly close that losing position, and immediately open a new position in the opposite direction. Don't play guessing games with the market. It is better to lose opportunities, than to lose money.
14. You can try to win $1000 in the paid demo competition, but you should only attempt this after developing a working individual trading technique, which has been consistently bringing you profit on the demo account. Learning to trade in the paid competition is pointless. In your attempt to win more money than everyone else, you will cross all limits of risk, and even if you win, you will not be able to trade so confidently with your real money. Such a risky technique will only bring losses on the real account, and you will not have a cautious, safe technique available.
15. Try to think of your demo account as your real account. The sooner you are able to convince yourself that the demo is trading the same real money that you would trade on your real account, the sooner you will begin to develop the proper technique of trading which you will eventually use on your real account. You must act the same way when demo trading, as you will when trading for real, because the technique you develop determines your success in trading.
16. No one knows better than you how much money you should put on your real account later on. In order to trade in the demo, it is recommended to lose money until your demo balance reaches the sum you plan to use on your real account. This is a unique opportunity to develop your necessary technique, in the conditions of your real account.
17. Try to begin trading at the same time of day, each time - the behaviors of the currencies at different times of the day differ, and by concentrating on a certain time of day to trade, you will be able to understand the characteristic behaviors of currencies at this time. Begin your day by researching events which occurred on the market while you were away from trading. For this purpose, our site has a great feature which will help: "Market News". After getting familiar with the market events, look at the graphs for the movement of the currencies, starting from "tick" charts and ending with daily, and select a tactic which you will use for this particular day.
18. Concentrate on 1-2 currency pairs, not more. Research their behavior thoroughly. Do not trade different currency pairs, but observe and analyze the behavior of all currencies - they are all dependent on each other. Understand that cross rates have the greatest influence over the behavior of the currency pairs, including the dollar.
Good luck!
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