New to this forum, introduction & some questions

[stuckinNY]

Hi, I just recently became very interested in Forex trading and happened to come across this forum. I have been reading every thread for over a week now. I am 20 years old and in my junior year of college (however, I am taking the semester off due to personal reasons).

Anyway, I am an economics/political science major. I first learned of the existence of Forex in one of my economics classes. This was a while ago, I didn't really pursue it at the time - but I have desired to learn about and perhaps enter one of the financial markets for quite some time. Forex appeals to me for many reasons - liquidity, low start up capital, and the hands on approach. Also, I simply enjoy learning about the markets - which seems to be a rarity as most of my peers find economics terribly boring.

To be honest, my economics classes are the only classes I have really enjoyed and done well in on a consistent basis. I'm not going to delude myself here - I am not going to be looking at a high paying position right out of college. This is not to say my grades are terrible but they certainly aren't stellar and with the U.S. job market these days - I've got to be realistic with myself, I'll be hard-pressed to be earning $30K a year out of college. Without giving away too much personal info, I do not attend an Ivy League caliber school, nor one of the prestigious tech schools (MIT, Caltech). I've been heavily considering law school for quite some time - and still am, but I've already taken on significant student loans and I will be forced into the workforce for at least a year or two after graduation.

So, this is where Forex comes into play. First off, it just interests me. I could stare at graphs and charts and read about this stuff all day (and I have been). Second, I realize the high profit potential that exists. However I am not kidding myself into thinking this is some get rich quick scheme; I have been reading/reading/reading and at this point I'm not even considering opening a demo account yet. However, the thought of making Forex trading an eventual career has high appeal to me. I simply want to be able to dictate my own work hours, and have complete control over my money & earning potential. I do not mind long hours at all, I just don't feel like toiling away in some office working for somebody else, making $30,000 a year.


Anyway I apologize for that long-winded introduction, here are some questions:

1) My biggest obstacle right now is my own self-doubt. I go through manic phases - one minute I'll feel like I'm totally grasping Forex and I have no doubt in my ability to apply what I've been learning to succeed in Forex. The next minute, I'll convince myself that I just don't have the sheer intelligence to succeed in this field. That's my biggest problem. I am willing to work very hard for this but if I just don't have the innate abilities/intelligence to succeed in this field, what does it matter?

2) Software recommendations anyone? I don't have any training in programming so forget that...I've been reading about backtesting and demo testing and I assume there is a software program you guys are using? I would like to backtest some systems but let's be honest here folks, I don't know the first thing about programming.

3) How much start-up capital is actually needed here to make money on Forex? Obviously I could open a mini-account today with $300...but I read a post somewhere in this forum where some guy claimed you need $300,000 capital to make $50,000 a year on Forex. Wow, I'll be lucky to have that much free capital to put on Forex 20 years from now. And simple math tells me that with a $300 account, I could only hope to make $50 in my first year? I'm planning on opening a mini-account, maybe in the fall depending on my learning curve - but $500 is about the most I can realistically afford to lose on Forex right now.

4) Systems...specifically - how do I make one? Technical Analysis appeals to me moreso than Fundamental simply because it isn't subject to my own bias/emotions. I don't have a background in engineering or programming so this may be a bit more difficult for me. I've noticed most people vehemently recommend developing your own system rather than adopting somebody else's. I have no troubles with this - but would it at least make sense to use somebody else's system as a base to work from?




Wow, that was a longer introduction than I planned it to be...my apologies. I probably have more questions that I meant to ask but these were the ones that popped to mind.

[Rhody Trader]

Originally Posted by stuckinNY

...
Anyway I apologize for that long-winded introduction, here are some questions:

1) My biggest obstacle right now is my own self-doubt. I go through manic phases - one minute I'll feel like I'm totally grasping Forex and I have no doubt in my ability to apply what I've been learning to succeed in Forex. The next minute, I'll convince myself that I just don't have the sheer intelligence to succeed in this field. That's my biggest problem. I am willing to work very hard for this but if I just don't have the innate abilities/intelligence to succeed in this field, what does it matter?

There are huge psychological elements involved in trading. Overcoming them is one of the first big hurdles new traders can face. The more time you spend watching and trading the markets (think demo account), the more those doubts should fade. A high IQ is not a prerequisite to successful trading. A good work ethic and discipline can come in quite handy, though.

2) Software recommendations anyone? I don't have any training in programming so forget that...I've been reading about backtesting and demo testing and I assume there is a software program you guys are using? I would like to backtest some systems but let's be honest here folks, I don't know the first thing about programming.

If you can use Excel you can back-test. There are, of course, a number of software packages, but you can do quite well with Excel.

3) How much start-up capital is actually needed here to make money on Forex? Obviously I could open a mini-account today with $300...but I read a post somewhere in this forum where some guy claimed you need $300,000 capital to make $50,000 a year on Forex. Wow, I'll be lucky to have that much free capital to put on Forex 20 years from now. And simple math tells me that with a $300 account, I could only hope to make $50 in my first year? I'm planning on opening a mini-account, maybe in the fall depending on my learning curve - but $500 is about the most I can realistically afford to lose on Forex right now.

A $50 return on a $300 account is less than a 20% return. I think most forex traders would call that very modest. The reason it's such an attractive market is that triple digit annual returns are possible. It all comes down to the amount of risk you take and the method/system you develop. Obviously, though, it takes money to make money. It would take one heck of a system to make $30,000 a year on a $300 starting account.

4) Systems...specifically - how do I make one? Technical Analysis appeals to me moreso than Fundamental simply because it isn't subject to my own bias/emotions. I don't have a background in engineering or programming so this may be a bit more difficult for me. I've noticed most people vehemently recommend developing your own system rather than adopting somebody else's. I have no troubles with this - but would it at least make sense to use somebody else's system as a base to work from?

A trading system is simply a set of rules by which you trade, including entry and exit strategies and money management. There are plenty of trading systems out there, including a great many in these various threads. You can start there to get ideas, but there is much educational value in developing your own. Also, you are more likely to stick with a system you have put a lot of work into testing and confirming. Programming and/or advanced math isn't necessarily a requirement.

[KPcurrency]

As I mentioned a 300 dollar account in another post, I will start with that.

I believe it is better to open a real money account with 300 dollars and learn with that, than to open a demo account with 50,000 "dollars" that can be replaced with a click of the mouse. For some reason, when real money is at stake things are just different. Forget about the difference in quotes with live vs. demo, it is different on the mental level. And it is this level that needs to be taken into account.

There are a lot of people on this forum "making money" with demo accounts they have had for years. So what. Real-time is what matters: real money being put at risk for real gains or real losses.

Now, as far as opening an account for trading and not to test ideas, 300 dollars is too low. It would be ideal to have 20,000 but in the end what you have is what you have. 3,000 dollars is not as good as 30,000, but most people don't have 30,000 to open an account. The more you have the better you are able to withstand the drawdown (make no mistake there will be losses), but what you have is what you have.

There is a lot of information out there on systems and methods of trading. Some of it is good, some is not. Start out by looking inward. We all trade our own belief systems, and if you do not know yourself the market is an expensive way to find out.

[stuckinNY]

Well damn, I opened a $5,000 demo account last night and I've already pocketed $700 bucks in fake profit....woohoo, I'll try and curb my enthusiasm. Just used some basic technical indicators I've picked up from reading this forum, along with my own intuition. Messed around with stop losses & profit limits. I planned on waiting until I had a better grasp on things (didn't want to create bad habits) but in hindsight I'm glad I went ahead and bit the bullet...a lot of what I'm reading makes more sense now that I've actually used a trade interface.

If you can use Excel you can back-test. There are, of course, a number of software packages, but you can do quite well with Excel.

It's been a long time since I've used Excel....can you elaborate on the best way to backtest via Excel? Sorry if this is a dumb question.

A $50 return on a $300 account is less than a 20% return. I think most forex traders would call that very modest. The reason it's such an attractive market is that triple digit annual returns are possible. It all comes down to the amount of risk you take and the method/system you develop. Obviously, though, it takes money to make money. It would take one heck of a system to make $30,000 a year on a $300 starting account.

That sounds more along the lines of my expectations. I'm not getting carried away with pipe dreams of turning $300 into $30,000 or anything...but that projection seemed overly pessimistic. Once I'm out of school, I'll have more capital at my disposal...kinda glad I don't have it now as there's no temptation to jump in headfirst anytime soon.




Thanks for the response....one more thing, is there a certain broker you recommend? I've read varying opinions on just about every online broker from the good to the bad. I'm using the CMS demo right now....

[stuckinNY]

KPCurrency -


I understand what you mean about the psychological difference between a live & demo account, and I agree that no matter how much I train myself to treat the demo as a live, it simply can't be done.

However, I'm definitely not even close to ready to open a live account, even with $300. At this point in my learning process it would be a waste of time & $300 as far as I'm concerned.

With the $5,000 demo account, the nice thing is I can test various ideas without having to worry. I can test pretty much any theory or system under the sun and find what works without losing any money.


And as for the eventual $300 live account, well, I figure if I'm going to take my lumps anyway once I open a live account...better to lose $300 then $1,000 or $3,000. Or is $300 simply not enough to even begin to learn the ins and outs of real live trading? While I can afford to put a couple thousand in a live account once I'm ready without doing significant damage to myself, I'd rather not without first opening a mini $300 account. Although if you think $300 is just wasting my time I'll reconsider.

[bobnat]

Originally Posted by stuckinNY

KPCurrency -


I understand what you mean about the psychological difference between a live & demo account, and I agree that no matter how much I train myself to treat the demo as a live, it simply can't be done.

No, you don't. No matter how much you think you do, you still don't. Demo accounts are good for learning the platform. After you've done that, go live with Oander with $300 and trade .01 lots. Demos only create and foster very, very bad habits which can be very difficult and expensive to break.

And not to demoralize you, but if it were as easy to make real money as it is on a demo account, don't you think we would all be fabulously wealthy right now and we sure as hell wouldn't be here answering your questions?

Nat

[stuckinNY]

Originally Posted by bobnat

No, you don't. No matter how much you think you do, you still don't. Demo accounts are good for learning the platform. After you've done that, go live with Oander with $300 and trade .01 lots. Demos only create and foster very, very bad habits which can be very difficult and expensive to break.

And not to demoralize you, but if it were as easy to make real money as it is on a demo account, don't you think we would all be fabulously wealthy right now and we sure as hell wouldn't be here answering your questions?

Nat

I understand this completely. I plan to develop the most disciplined approach possible on the demo before I go live. Although I realize this will only take me so far.

So why exactly is it so much easier to trade on a demo than a live account? Is it purely psychological or are there structural differences between trading demo & live?

[Rhody Trader]

Originally Posted by stuckinNY

So why exactly is it so much easier to trade on a demo than a live account? Is it purely psychological or are there structural differences between trading demo & live?

Psychology is exactly the reason why traders don't do as well once they go live. The demo accounts, as has been suggested, are good for testing things out, but the actual process of trading (getting in and out, managing positions, handling risk) is different. In a demo account there's essentially no accountability. If you blow it up, who cares? You can over trade (either positions too large or trades too frequently) with no real punishment. You will react differently when real money is on the line.

It was recommended you open an FXTrade account (O.A.N.D.A.) Do that. You can literally trade a single unit at a time (1 usd, 1 eur, 1 gbp) and don't even have to put up $300 to do so. Put some minute amount at risk, get a feel for trading it, then scale up as events warrant.