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Have you ever come across a person who asks this question? Maybe you haven’t because you are also new to online forex trading. You are probably also looking for a person to guide you.

But if you were in my position, this type of questions has everything skewed up. I normally do not answer such questions, but if I could, I would have only one answer for such people: “What…? You mean you are a newbie? Well, go and invest your money elsewhere. You will never become a profitable forex trader!”

Asking questions like this one is utter nonsense.

You may call me rude, pessimistic or arrogant, but such a trader will lose. Yes, you will lose, if you are the kind of person who asks such questions.

It is obvious that such a person has not bothered him/herself to even push a single keyboard key to find out about online forex trading.

Such a person does not want to tire their brain doing research for themselves and gathering information about online forex trading.

Such a person does not consider other people’s time to be valuable. How can s/he expects other people to be the ones to answer these basic questions about forex trading?

And this is the sole reason why they will lose. A person with such an attitude and ‘exceptional’ research knowledge may never become a profitable forex trader.

An investor is a die-hard researcher at heart. An investor keeps an open mind and has the ability to find all the answers by him/herself.

Before you ask such dumb questions, remember that Google is your best friend. Type your question on the search engines, and 10/10 times, the answer will be right there in the search engine results.

There are two type of investors in the forex market. Those who learn all there is to learn about the market, and those who approach forex trading as if it was a gamble. They do not take their time to learn. To them, investing in forex is not so much unlike spinning the roulette. They click blindly on the charts and wait for Lady Luck to bless them with profits.

Wrong approach. Traders who do not learn end up making massive losses.

If you want to separate yourself from this sad group of ‘trader’s, you should take your time to learn how the forex market operates.

Here are 12 most important things that you should take time to learn:

1. Develop Your Trading Plan

By failing to plan, you are planning to fail- Benjamin Franklin

I’ll illustrate the importance of having a trading plan with situations that I encounter almost on a daily basis.

When new traders discover an uptrend in the market, they usually ask something like, “ The EUR/USD is on an uptrend, where should I enter the market?” My reply is usually, “What amount of risk/reward ratio are you willing to place on a trade?”

This reply catches them by surprise. Most forex traders in Kenya concentrate so much on being right and forget that they could be wrong. The market could go against you or it could hit a top and turn right back.

Without a trading plan, it means that you do not know what to do not only if a trade goes against you, but also when a trade goes your way. Big profits on paper could turn into massive loses when you do not have a trading plan.

Here are a few important points that I use when developing a trading plan. Feel free to borrow from the list when you are developing your own trading plan:

  • I always make sure that I know where and how to enter the market.
  • I always know what amount of money I can put to risk on any particular trade
  • I know when to leave if the market does not go my way
  • I know how much profit I am expecting from every trade if I am right
  • I always protect my profits by placing a trailing stop loss on my orders

These are just but a few of the things that go into developing a trading plan.

2. Have an Aggressive Money Management Strategy

Money management is one of the most important aspects of online forex trading. It is the one thing that will make or break your career as a forex trader. Unfortunately, a lot of traders enter into trades without taking money management into consideration.

If you are serious about trading, you have to learn how to manage your money.

Good money management starts way before you open a live trading account. It should start even before you are trading on a demo account. Good money management should start when you decide that you want to invest in online forex trading.

How, you ask?

Suppose that you had $20,000 that you have decided is a good starting capital for your online forex portfolio, would you put all the money on your forex trading account? You’d be putting yourself at an aggravated risk by doing so. What happens next if you lose all the money in the account for whichever reason? What if your forex broker goes broke bankrupt, closes the company and never pays back your money?

Or what happens if you accidentally take a 20 lots position and forget to set a stop loss?

If $20,000 is all you have to start trading, you should consider opening an account with a maximum of $1000. You can always inject more money into the account as you see necessary or when you have gained substantial trading experience.

The second most important factor to consider when managing your money is leverage. While it is possible to get accounts with leverage as high as 1:500, a huge leverage is a double-edge sword and usually a reserve of seasoned and aggressive forex traders in Kenya.

As a general rule of thumb, you should never risk more than 2% of your account in any one single trade.

Learning the art and science of money management will determine how you prosper in forex.

3. Make use of stop loss orders

With so much activity going in the forex market and so many a facets of setting up a trade, it is sometimes possible to forget the small things like setting protective stop loss orders on your trades. Apart from mitigating your losses, a stop loss order also lifts the burden of monitoring your trades from you. With proper stop loss orders, you can set up your trades and move on to other things, leaving your trade to play.

What is a stop loss order?

Trading online forex with your real hard earned cash is a serious business, and it should be taken seriously. As such, you should take time to familiarize yourself with the different trade management tools that you have at your disposal.

A stop loss order is an order that you place on your active trades to prevent further losses. The stop loss closes your position in case the market moves against you and reaches your specified level of acceptable loss.

As an example, if you decide to go long on the USD/JPY at 109.58, you could set a stop loss at 106.58. If the market goes against you and reaches this level, your trade would automatically be closed, preventing further losses.

Most importantly, a stop loss order eliminates one of the hugest barriers to trading: emotions. Many traders tend to fall in love with their trades, believing that the trades will turn around. They hold on losing positions for far too long, and pay dearly for it.

To become a successful forex trader, you have to learn not only how to place stop loss orders on your open positions, but also where to place the stop loss orders. To tight of a stop loss means that your stop loss will be hit by the slightest drawdowns or noise in the market, while spaced out stop loss orders could lead to insufferable losses on your account. The art of the stop loss is one of the main lessons we teach traders during our paid training sessions.

4. Close your profit-making trades at the right time

Closely related to the art of putting stop losses on your trades is the art of taking your profits at the right time. One of the biggest blunders among new forex traders is that they take tiny profits too soon but allow their losing trades run.

When is the right time to take your profits?

The right time to take your profits will be dictated by your trading plan. Before you enter your trade, you should have a predetermined entry and exit points. This reduces the impact of emotions on your trades.

Your trading style also determines when you should take your profits. For scalpers, taking profits as soon as possible is an excellent strategy, but if you are a swing trader, you might want to let your trades run for longer.

5. Exercise Proper Trading Discipline

A lot of forex traders in Kenya end up burning their accounts not because they were not trained properly in the forex course, but because they lack the proper trading discipline. It is hard to become a successful forex trader unless you learn how to be disciplined, how to stick you your trading plan and how to substract emotions from trading.

One of the best exercises to help you develop stellar discipline is to watch the markets the whole day without taking a trade, even when you have an excellent entry set up. Repeat this several times every month and you should be on your way to becoming the next successful forex trader in Kenya.

Every successful forex trader needs a set of skills and characteristics. Some of these skills we can acquire through training while others we can only develop from constant practice, which is why a demo account comes handy.

The ability to understand the fundamentals of a currency and the ability to point the direction of the trend, for instance, are some of the key skills that online forex trading demands, but none of them is as important as developing the proper trading psychology and discipline.

What’s it About Trading Discipline That is so Important?

If you ask me, or any other sober forex trader in Kenya, they will tell you that the psychological aspect of trading is the most important and defining part of trading. Forget about a fancy trading system or a million-dollar forex trading course, if your psychological game is not intact, you are headed for doom.

A s a forex trader you will always be entering and exiting trades, sometimes on very short notice. The market will constantly force you to make snap decisions. To operate profitably in such circumstances, you will need an incredible mental game, and by extension, discipline, so that you are able to stick to your plan.

This is what we call self-discipline.

According to Mark Douglas, the author of Trading in the Zone, self-discipline is “a mental technique to redirect our focus of attention to the object of our goal or desire, when that goal or desire conflicts with some other component of our mental environment.”

In short, self-discipline is the ability to develop a mental framework that lets you stay focused and motivated in spite of challenges, losses, mistakes, and conflicts of interest. Particularly, you will need to teach yourself how to get rid of the negative feeling that is associated with losses and setbacks.

Unfortunately, this is easier said than done. When faced by the real market risk, many traders abandon their trading plans and succumb to emotional trading. Greed, fear and euphoria can get the best of you and ruin your plans.

Things would have been different if self-discipline was a trait that you were born with. Unfortunately, it is not.

Many traders find it difficult to develop steady forex trading discipline, which is why automated forex trading software has become so common. But trust me, it is possible to develop the right trading discipline. Being disciplined will help you become a more profitable trader in the long run, even if you decide to use automated trading software in the future.

Here is how you can build your trading discipline:

Developing Clear Trading Goals

Setting clear trading goals and understanding the motivation behind your trading is a good place to begin. Ask yourself, “Why do I want to trade forex? What do I want to gain and achieve from investing in the forex market?”

Sitting in front of your computer, taking trades and hoping for the best is not enough. You must have a target in mind. What are you aiming to achieve by taking that particular trade? How many pips do you hope to gain?

Many beginner forex traders get into trading because they feel it is a get-rich channel. They set unrealistic goals and pay a hefty price for that. Don’t just set a bunch of crappy goals because I told you to do so. Your goals need to be realistic. It is important that you set challenging but achievable goals to avoid frustrations that may result from not hitting your target.

Without a goal in mind, it is possible to let the discouragement of being new to trading defeat your desire to learn.

Here is something that you must keep in mind as you venture into forex trading; every endeavor that you set to undertake will always be difficult in the beginning. This hold true more in online forex trading. Chances are that you will suffer many losses. This part will be disheartening, and if you are not disciplined, chances are that you will give up trading.

Maintaining Focus on What Needs to Be Done

Setting clear and realistic goals puts you one step closer to becoming a successful and disciplined forex trader. It is easier to stay focused on your goals, but that assumes that you actually get off your ass and do what needs to be done i.e. trading. For instance, if your goal is to let profits run and cutting your losses short, you must start putting trailing stops to your trades.

On the contrary, if you did not set clear trading goals, you’ll probably waste a lot of time trying to figure out what needs to be done. In return, this makes you more susceptible to your emotions.

Keeping a Trading Journal

Keeping a trading journal is an easy way to track your past trades. It can also help you identify areas that you need to work on. I also find that a trading journal helps me avoid making impromptu trades since I hold myself accountable for every trade that I take.

After a streak of losses, many traders, I included, start to take trades that are not in their plan. By recording your trades in a journal, you will identify this behavior and work to correct it.

A trading journal is also a great way to keep yourself motivated. It is unavoidable that you will face a lot of obstacles along the way. There will be a lot of times when you will feel discouraged and ready to give up. This is where your self-discipline will be put to the test. In order to succeed, your resolve to push on must be greater than the temptation to give up.

When you have reached your trading goals, take some time to refer back to your trading journal. What were the trades that you took that led to your target. What kind of analysis led you to hit your target? Can you replicate it on your future trades?

I am a member of several online forums where members discuss all matters forex. One of the hottest/recurrent topics that I see in these forums concerns problems with online forex brokers. In fact, I would go ahead and say that not a day passes without someone posting about a ‘problematic’ broker.

The problems discussed range from forex brokers not processing withdrawal requests on time; forex brokers who are so aggressive in stop loss hunting or forex brokers who close all your open positions and liquidate your account for no evident reason.

Almost every beginner to online forex trading passes through a phase where they mistrust their forex broker. I understand this skepticism. It is actually an excellent survival mechanism. Online forex brokers range from highly reputable and strictly regulated firms handling a lot of client accounts honorably, to those that are highly questionable in price quotation and order execution, to the outright frauds that sprout overnight and are gone by morning, depriving you of your money even without giving you the chance to set up your MT4 trading software.

It is therefore recommended that you do thorough research when you are choosing a forex broker to trust with your money. Carrying out due diligence when choosing a broker is the number one rule that will help you avoid future problems with your broker.

Who/What are Online Forex Brokers?

Online forex brokers are financial institutions that act as intermediaries between you and the major liquidity providers or the interbanks. The brokers execute orders on your behalf or, in the case of ECN brokerage firms, provide a platform for the retail traders to place buy and sell orders.

Forex brokers operate through websites which allow you to make trades via proprietary software or through an independent trading software such as the MetaTrader4.

Forex brokers usually make their money via the spread, which is the difference between the bid and the ask price. For instance, a forex broker may buy Euros at 1.5475 U.S dollars and at the same time sell the Euros at 1.5478. In this case, the spread is 0.0003 USD or 3 pips.

Before you start investing, it is important that you do background research to establish whether the broker you are thinking of investing with is reputable and whether he has the features that you are looking for.

Here are 9 questions to ask yourself when you are shopping for a forex broker:

  1. Is the broker regulated, if so, which bodies/organization regulate the broker?
  2. How efficient is the brokers trading platform?
  3. Capitalization
  4. Is the company a broker or a dealer
  5. How supportive is the broker’s customer support department?
  6. What is the cost of trading with the broker?
  7. What account types does the forex broker offer?
  8. Does the broker offer any value added services?
  9. What are the broker’s requirements concerning margin and leverage?

Is the Broker Regulated? In Which Country?

Regulation for forex brokers differ from country to country. I have heard people argue that since we are trading forex in Kenya, it does not matter where the forex broker you choose is regulated. This is a big no. I’d rather choose a broker in a country where there are strict regulations (the US of A) than choose a broker where the regulatory framework is a sham (Russia or Cyprus?).

Some of the countries where the regulations are intact include:

  • The USA
  • UK
  • Eurozone
  • Japan
  • Australia
  • Switzerland

Choosing a broker that is regulated in one of these countries brings you one step closer to avoiding future problems with your broker or to avoiding an outright scam.

However, you shoudn’t take a broker’s word for it. It is easier for a forex broker to write that they are regulated by so-and-so on their website. Anyone can do that. Take it a step further. Visit the regulatory authorities website and seek whether the broker is really regulated by the said authority.

How Reliable is the Brokers Trading Platform?

Depending on your hardware and software limitations, you may either choose to trade forex on a web-based application or on a software that you install on your computer. You need to decide which platform suits you best before you choose a broker.

The broker you choose must be able to offer the trading application that suits you. More importantly, however, the trading platform needs to be perfectly stable. You do not want the agony of a platform that hangs whenever the market activity increases. Nothing else is as important as the stability of the trading platform; forget the look and feel. Stability is king.

User-friendliness is another unique characteristic that you need to watch out for when vetting a broker’s trading platform. In the forex trading circles, user-friendliness refers to the ease with which you can place your orders, including limit and stop-loss orders. Most brokers offer one-click order platforms.

How Capitalized is the Forex Broker?

The more capitalized a forex broker is, the better their credit connections with liquidity providers are.

Since forex is traded over the counter (OTC), it becomes exceedingly difficult for a forex broker to get competitive currency pricing without depositing a considerable margin with a lending institution or bank.

In addition, many forex brokers are required to comply with a minimum capitalization level. This capitalization level is directly related to the broker’s ability to stay solvent. If a forex brokerage company does not publicly declare its minimum capitalization level, this could be a warning sign about the company’s solvency.

Is the Brokerage Firm a Broker or a Dealer?

Understanding the nature of a forex brokerage company is an important step as there are several types of brokers in the OTC forex market.

Dealing with a broker

Brokers act as intermediaries between you and the market makers/dealers. Brokers make use of computer systems to process your orders. The orders do not typically go through a dealing desk, hence the term ‘non dealing desk’.

The technology through which a broker sends your orders to the market makers/dealers is called Straight Through Processing or STP. The spreads that you get on your orders are dependent on the market maker that your broker routes your order through.

Brokers can either charge you a fee for this service or are compensated by the market maker for the transactions that are routed to the market makers desk.

Dealing With a Market Maker aka Dealer

All market makers make use of a dealing desk, which is the traditional method used by conventional financial institutions and banks to process customer orders. As the name suggests, market makers ‘make’ their own bid and ask price and display them on their trading platforms.

The market makers are always ready to take your order. However, in doing this, they become counterparts to each transaction you make. If you happen to sell 10 lots of USD, the market maker must be prepared to buy the 10 lots from you. In others words, whenever you sell a currency, the market makers must buy. The vice versa is also true.

As counterparties to your trades, the forex market makers may try to hedge or cover your order by passing it on to someone else. There are also times when the market maker will decide to hold your order, and trade against you.

Most market makers provide you with a fixed currency price throughout the day. The exchange rates that they set is based on their best interests. However, they try to keep the prices fair due to the stiff competition that characterizes the market maker industry.

On paper, market makers are supposed to make profits through the spread that their charge you. However, this is always not the case and some forex market makers have been known to utilize unscrupulous means to get an edge over you.

ECN Brokerage Model

The ECN brokerage model is the new kid on the block. An ECN broker will pass you prices from various market participants including banks, market makers and other financial institutions. ECN brokers display the best bid/ask price on their trading platforms.

Unlike the market makers who offer fixed spreads, the spreads offered by ECN brokers vary depending on a currency pair’s activity in the market. During periods of intense market activity, ECN brokers will not charge any spread.

Unlike the other brokerage models that charge spreads on your trades, ECNs charge a commission on every trade that you place. Really authentic ECN brokers do not play a part in price determination, therefore, your risk of losing trades due to price manipulation is non-existent.

Customer Support

Customer support is one of the core pillars of online forex trading. Since the forex market is a 24-hour market, the forex broker you choose should be able to provide support around the clock.

Most importantly, what medium of communication does the forex broker offer? Email, toll-free phone numbers and online chat applications are some of the most important communication tools offered by forex brokers.

You also need to deal with a forex broker whose customer support staff are knowledgeable. There is nothing as agonizing as having to deal with customer reps who do not have a clue to what you are talking about. It wastes time, which is one of the most precious resources you have as a forex trader. You can tell how knowledgeable the customer support staff is by the way they answer your questions.

It is not uncommon to run into technical issues when trading. Try to simulate a technical glitch, formulate the questions that you would have, and see how the support staff answers them.

Cost: Spreads and Commissions

The forex market prides itself on being a cost-free market to invest. Many market markers try to entice retail traders to trade more and more from this unique feature of the forex market; they promise no commissions, no regulatory fees and no data fees.

Something that the market makers fail to tell you is that your trading costs depend on you trading. Your frequency of trading, ratio and size have an impact on the cost of your trading.

Depending on the forex broker you choose, you will either pay:

  • a fixed spread
  • variable spread, or
  • commission on your trades.

As a quick reminder, spread is the difference between ask price and the bid price.

Which is the best choice?

Depending on how you look at it, you may take the fixed spread as the best choice since you always know what your trades will cost you. On the other hand, a variable spread means that you may sometimes pay a very low transaction cost, especially if you time your trades to coincide with the periods of heightened market activity.

Most forex brokers do not charge commission on trades, so the spread is the way that they make money. In such a case, the lower the spread, the higher the hypothetical profit that you will make.

In the case of forex brokers who offer variable spreads, you can expect the spread to be as low as 1 pip or as high as 7 times during periods of low market activity.

The best deal lays in choosing the right forex broker. If you choose a broker who is well regulated and capitalized, you have less to worry about. Secondly, you need to factor in your trading model and choose a cost model that is favorable to your trading model.

Slippage

Reduced liquidity or high volatility may cause your forex broker to apply ‘slippage’ (or requotes) on your orders. Slippage occurs when your order is executed at a price that is different from the one that was quoted. If you trade the news or you are a small timer, this is a cost that you cannot bear to bear. You should therefore choose a broker who does not offer requotes.

Account Types

Many online forex brokers offer different account types ranging from standard accounts, to mini accounts, to micro accounts. The size of the account depends on the lots that you wish to trade.

If you have forgotten about lots, here is a quick overview of lot sizes:

  1. A standard lot is a lot that consists of 100,000 units of the base currency
  2. A mini lot consists of 10,000 units of the base currency
  3. A micro lot consists of 1000 units of the base currency.

The mini and micro forex accounts require low initial capital while the standard account may demand that you invest a lot of money.

As you can see, the account type is depended on the amount of capital you have to start trading. Choosing a forex broker that offers an account type of your size will save you a lot of headaches when you are managing your money and risks.

Does the Broker Provide any Value added Services?

Easy access to charting tools, real time data, news analysis and economic data are the bread and butter of all professional traders. If your forex brokers offers all these tools, you have landed on a winner.

Leverage and Margin Call Policies

A lot of forex traders in Kenya gravitate towards forex brokers who offer high leverage. However, you should remember that leverage is a double-edged sword. It can make you freaking rich or agonizingly poor. Do not base your decision of a forex broker in Kenya only on this feauture.

Some brokers offer a fixed leverage rate while others will vary the leverage rate depending on the currency that you are trading.

You also need to understand your broker’s margin call policy.

You want to be a successful forex trader. You want to retire from your 9-5 job and enjoy working from anywhere in the world. You want to spend more time with your family, and you want to provide your loved ones with the kind of lifestyle that they deserve.

Trust me. All this is possible when you invest in the forex market.

However, success in online forex trading, like all other good things, does not come on a silver platter. You have to work for it. You have to condition yourself for success. You have to change some habits, and adopt other habits of successful forex traders, and you have to open your eyes to what is really happening in the market.

What Limits Your Success as a Forex Trader?

A lot of forex traders in Kenya believe that they need an exceptional trading strategy or advanced education in finance and related fields to be successful in forex trading. Nothing could be further from the truth.

Good academicians do not always make good forex traders and people who develop incredible trading systems do not always end up profitable. Long-Term Capital Management (LTCM), a hedge fund management firm that was based in Greenwich, is a good example of how good academicians do not make the best forex traders.

LTCM’s board of directors included Rober C. Merton and Myron Scholes, two Nobel Prize winners whose contributions to the economic theory are among the most valuable in our century. Nonetheless, their articulate analytical skills and spectacular knowledge of the markets did not prevent the collapse of the firm in 1998.

It is clear that lack of trading knowledge was not the cause of collapse for the most reputed hedge fund firm in Wall Street. Instead, it was the 3 demons that finally got up with them and razed their firm to the ground.

These 3 demons, if not tamed, will also be the cause of your losses.

What am I Talking About?

Emotions.

If you trace the source of failure for every trader, beginner, intermediate and pro alike, you will realize that their failure is not caused by lack of understanding of the market. Majority of the failure in forex trading is rooted in emotions.

There are particularly 3 strong emotions, which is not tamed and handle cause the fall of many a trader.

Greed

The greed demon has to be the most tempting among traders. The demon has a long and luscious tongue that constantly whispers to you that unless you do act now, you will miss the most profitable trading opportunities in the market.

The greed demon is always on its feet. Like it is high on something. It is always urging you to enter into trades faster. It will cause you to lose focus as you rush to make trades that have not been carefully analyzed. You have to recognize this demon for what it is. It is an emancipated and empty-bellied demon since none of its exhortations for speed and greed lead to profits.

Every trader has a natural inclination to want to make money. Every trader attaches great importance to financial success. I wouldn’t be trading if I was not profit-oriented. In fact, no trader would withstand the pressure of the market if they were not driven by the desire to make money. The drive to make money, in moderate proportions, is healthy and a requisite driving force for traders.

The drive to make money, however, becomes unhealthy when it becomes the main driving force of your trading decisions; when it starts interfering with your trading decisions and trading strategies. Only logic should dictate your decisions in the market.

So, how do you strangle the Greed Demon and ensure you are making the right trading decisions?

The first step to strangling the greed demon is to ensure that you have developed a disciplined approach to trading. This will reduce the impact of impulse decision in your trading.

By developing a trading system and strictly following it from the very start, we can ensure that greed has no play in our trading decisions. You will be able to make your decisions based on a tested and proven trading setup.

Emotions can only thrive where fear and uncertainty are in plenty. To prevent fear and uncertainty, you need to make sure that you have developed, backtested and taken your trading system on a roller-coaster ride on a demo trading account.

Also, keep in mind that your desire, motivation and quench for profits will not actually make you achieve profits. There is nothing to be achieved by bowing down to the demon of greed.

Fear

You will recognize this demon by its sharp and shrieking voice that is always shouting to us of imminent dangers ahead. The demon injects second-thoughts and doubts on whatever trades you want to take.

The Fear Demon has the opposite role to that of greed. Instead of pushing us to trade like automation weapons, opening and closing positions with the speed of lightning, fear does the complete opposite. It tries to convince us that we cannot trade profitably, regardless of the meticulousness of our trading systems and the thoroughness of our analyses.

If they overcome fear long enough to get into trades, fearful traders will not wait for their positions to realize profits. They close positions prematurely, and end up making massive losses from drawdowns, commissions and broker spreads.

Apart from not taking trades and closing positions prematurely, fear also leads to more irrational decisions.

When dealing with fear, it is important that you realize the distinction between fear and conservative trading. A conservative approach to forex trading is usually a recipe for success. A conservative forex trader will be skeptical of all information he gets, but that does not stop him or her from taking action when his/her trading system shows that a profitable trade setup in in play. A fearful trader on the other hand is not only incredulous about the opinions of others but also about everything that his trading system tells him. He is always confused of what to do, where to look, and which trade to setup to take and which one to avoid.

A fearful trader does not trust anyone, not even himself or his trading system. He cannot evaluate the markets effectively as he has a gnawing mistrust of all trade analysis tools. The trader always ends up trading in a style akin to casino gambling; the outcome is always disastrous long term losses.

How can you strangle the demon of fear?

To avoid the calamitous results of fear, you must train yourself to realize that no trader ever became successful through randomness. You must be convinced that you are in full control of your choices. You must have a clear trading system that you adhere to until it proves that it is no longer profitable. All this is possible when you have a logical and sober approach to trading, something that can only be achieved through patient and persistent study of the forex market.

Another way to strangle the demon of fear is to avoid overleveraging your account and having a tight risk management strategy, such that a losing trade would not wipe out your whole account.

Euphoria

Euphoria is the queen of all forex trading demons. It promises infinite wealth in a limited amount of time.

Don’t be fooled.

Euphoria can only deliver destruction, disappointments, and destitution.

Euphoria works hard to ensure that you only see the rosy side of investing in online forex trading. It makes you think that you have somehow been blessed with the Midas Touch. It makes you think that everything you touch will turn into gold.

Most traders will least be affected by euphoria because many are aware that being successful in forex trading is no child play. While it is possible to make huge profits in a short time, such results are usually the result of many hours poured in studying forex and practicing trading on a demo account.

In case of many forex beginners who do not have background study or practice, euphoria usually results in despicable results. Beginners usually develop euphoria after a string of profitable trade setups that make the trader believe that all is rosy in the markets. As the trader gets comfortable, his analysis slackens, he takes larger unmitigated loses, and this is when the demon decides to strike.

The key to vanquishing this demon is to realize that no analysis or trading system is error-proof. A successful forex trader is always skeptical of his systems, although this does not stop him from taking trades as he bases all his decisions on logic alone. The successful trader realizes that the success of previous trades is not an indicator of profiting in future trades.

A successful forex trader does not get excited about his past performance. The next trades may or may not be successful depending on how diligently he has studied the market. Thus, the best way of killing euphoria is realizing that the success or failure of previous trades does not impact the outcome of the next trades. The success of every trade is only Dependant on how carefully you have studied and analyzed the market prior to opening a position.

Conclusion

The problems I have analyzed above are associated with trading psychology. In order to perfect your trading psychology, you must work to reduce the role of emotions in your trading decisions. You must understand that your success or failure is not a matter of luck, but a consequence of the choices that you make.

I have always pointed out that it is hard to get an unleveraged account wiped out from a single trade. If you lose all your money from a series of trades, then it is clear that luck has no role to play in that.

The best way to deal with the emotions that are associated with online forex trading is to develop a logical approach to trading. Study the market and understand its mechanisms. Understand the forces that drive price. In this website, I strive to equip you with the basic understanding of these factors and some more. To never miss any of the informative news, consider signing up for my newsletter.

 

One of the downsides of pursuing online forex trading as a full time career is the lonesomeness that characterizes online trading.

Unless you are a bigshot forex trader who reports to a bank in the morning, sits on a leather swivel chair and conducts meetings with clients the whole day, you probably won’t have the luxury of meeting other experienced traders.

But thanks to the internet, you can find a good forex mentor by doing a simple Google search.

There are hundreds of online forex ‘mentors’ on the internet. A handful of them are right here in Kenya. But not everyone who calls themselves a forex mentor is genuine. Some are out to grab your money and run. Some have never pulled any successful forex trade setups.

What are the important factors that you should consider when choosing an online forex mentor?

Here are some qualities that a good forex mentor should have:

1. Credibility

Any good forex trainer should have evidence that whatever they are saying is real. A good forex mentor should have a track record of successful forex trading (3+ years). There should be records to back up his or her claim and students that s/he has mentored to give testimonials.

2. Inspiring

A forex mentor should be someone who inspires you; someone that you can look up to. In essence, mentoring should go beyond forex trading.

Conversations with your forex mentor should include your projected goals, aspirations, money management, and possibly faith and relationships.

Your online forex mentor should have your best interests at heart. He or she should be able to guide you towards your desired lifestyle.

3. Trustworthy

Trust plays a very big role in every form of relationship. If you cannot trust your forex mentor, that relationship is doomed from the very start.

You need to be able to open up to that person about your greatest fears and aspirations. You have to trust this person’s advice and judgement. You will most probably be adopting his forex trading strategy and he will be critiquing your trades.

Most importantly, you will soon be moving from a demo trade account to a live account. Do you trust this person enough to let him or her give you the proper advice on how to trade your money?

4. Honest

The forex market is unpredictable. Loses happen as frequently as profits do. If your forex mentor promises you 100% success, he is probably not being honest with you.

A genuine forex mentor does not sugarcoat the risks involved in online forex trading. It is his job as a mentor to help you prepare for the realities of the forex market.

5. Encourages independence

Don’t fall in love with the forex market who never rebukes you to try trade setups on your own.

A good forex mentor should be able to instill confidence in you and make you feel that you can stand on your own. After all, at the end of the day, you are the one to make calls on how you trade your money.

I am not going to tell you that finding a good forex mentor will be easy or that these characteristics will immediately be apparent when you start chatting with your mentor.

However, you can always try your luck by chatting and interacting with other online forex traders in Facebook, Twitter, and forex forums.

What Should You Learn from your Forex Mentor?

Many aspiring forex traders jump into forex training programs without understanding what is in it for them. Do you know what it is that you want to learn from your forex mentor?

If you don’t know what you want to get from your forex trainer, it will be very difficult for you to find a trainer who suits you. Do yourself a favor. Spend a few hours Googling information about forex trading and absorbing as much as you can before seeking a mentor.

 

Is there anything like the fear of success? I know you are thinking that I am kidding or I am being sarcastic. No. I am not.

The fear of success is as real as the fear of failure. Never felt it? Count yourself among the few lucky forex traders in Kenya.

The fear of success is, in fact, more calamitous than the fear of failure because a lot of traders do not know that it exists.

We all say that we want to be successful. We want to make enough money to give our families the kind of lifestyle that they deserve, but subconsciously, we are freaking afraid of all the changes that come with success.

You see, success comes with new and higher expectations. I compare it to a soccer player who scores the most goals and skyrockets to become the top player in that football season. The chances are that the player will set his goals higher during the next season. He will want to score more goals and surpass what he scored the previous season.

And therein lies the problem.

The Pressure of Success

For a lot of people, the pressure that results from a one-time splendid performance may keep them from even trying.

In our case, the soccer player may be afraid that if he tries, he will fall short of how he performed in his excelling football season. He’d rather remain on the sidelines than try and make a fool of himself.

Have you ever felt something closer to this?

This situation is not uncommon. After all, a lot of us grew up being grilled about the importance of excelling in whatever we do.

This pressure to excel makes online forex trading more difficult because no matter how much you try to become better, you cannot avoid making losses. They are part and parcel of trading. You can’t win in all your trades.

Mostly, the fear of success in forex stems from being anxious that you could be on the wrong side of a trade setup.

Many traders identify an incredible entry signal. The pips are just right, and if the trade goes their way, they would walk away with a tidy profit, but the fear of success holds them back.

A few hours later, they are beating themselves up as they would indeed have walked away with a tidy sum of profit.

What can you do to banish the fear of success once and for all? Here are 7 tips:

i.             Focus on the process not the profits

The problem with many forex traders in Kenya (and around the world) is that they focus so much on the profits they stand to gain. If they lose on a trade, their confidence is instantly shattered. The one-time loss keeps them from jumping in on entry signals that they would normally take.

One plausible solution to this is to put the profits and losses out of your mind and focus only on your trading strategy. By doing this, you not only take away the pressure to perform but also get to understand what can be done to improve your forex trading strategy.

ii.           Have an open mind

The behavior of the forex market is constantly changing, which means that you also need to constantly change your trading strategies.

The problem with many forex traders is that they believe that they have to be right; that their strategies are right. They do not want to admit that they were wrong. They are afraid that the market will make them appear foolish.

To overcome this fear, you need to let of your need to always be correct. This will relieve you of the pressure of wanting to be right all the time. It will free your mind to concentrate on and better understand what is happening in the forex market at that particular moment.

iii.         Set realistic trading goals

Goals in forex trading help you bridge the gap between your hopes and reality. If you set unrealistic goals, you set yourself up for a tirade of disappointments. The disappointments affect your mental state and impair your decision making capabilities.

By setting realistic trading goals, you begin to see how far you are from achieving them. You get to a clear mental picture of what it will take to achieve your goals. If they seem far-fetched, you can always cut back on your expectations.

Trading in the short-term is more profitable that trading in the long term.

You can only predict the market correctly in the long term.

The stochastics is oversold so the market is bound to go downwards.

Forex trading is difficult.

Forex trading is easy.

Online forex trading is lucrative and worth every single shot.

Technical analysis is the best way to figure out the markets.

What do all the above statements have in common?

All of them are beliefs about the forex market. All of them shape what we call the trading psychology of the person who holds the belief.

Can you identify any belief that you subscribe to from the ones listed here?

I will let you into a secret about any kind of belief.

Beliefs are hard and painful to let go. Some of our beliefs are formed from traumatic experience that we’ve had. These beliefs and perceptions may not be necessarily bad, but how do they affect your forex trading career.

Online Forex Trading is all Beliefs

Online forex trading allows you maximum freedom to do as you wish.

There is no teacher to cajole you from taking a certain trade.

You have the freedom to decide which trading session you will use to place your trades.

You decide the currency pairs that you will trade, and

You choose the maximum or minimum lot size you will trade

So, if the forex market accords you all this freedom, what dictates your trading decisions?

The simple answer lies in beliefs.

You may think that your forex trading decisions are determined by a piece of news or a movement of a technical indicator on the charts, but it is not. It is your basest belief about the news or the technical indicator that influences you to make whichever trading decision that you make.

You can trace back the path to every trading decision you have ever made on your beliefs.

For instance, why do you prefer to trade a certain currency pair and not another one?

Or why do you use the particular trade setup that you use?

If you trace back the answer to the above questions, you will be shocked to realize that these decisions emanate from a strongly held belief.

Becoming aware of the beliefs that shape your trading decisions is the first powerful weapon you have in your trading arsenal.

What are your beliefs about online forex trading?

Let us do something practical here. Take a pen and paper and see if you can list at least 7 trading decisions that you have.

Here are mine:

  • I must always trade using a predetermined trade plan
  • Forex trading is as risky as any other investment you decide to make
  • I must have a risk/reward ratio charted out before I place any trade, and this must always be 3:1
  • Support and resistance levels are extremely crucial when it comes to predicting and analyzing the market
  • Trading the forex market is all about beliefs!
  • And these are not all…

Looking at the above, I can already see how each one of these beliefs shape my trading decisions. Can you see the same when you look at your 7 beliefs?

Where Do Your Beliefs Stem From?

I have already mentioned that most beliefs are formed after going through a traumatic encounter, but this is not the only source of your beliefs.

  1. Nature/Evolutionary

At the most basic level, beliefs are evolutionary. They are programmed into us as part of fight or flight that has evolved for over thousands of years. Beliefs, just like emotions, are hardwired into our DNA, our very fabric that makes us human.

  1. Environment

Most of your other beliefs are a byproduct of your upbringing. Would you have different beliefs if you grew up in the USA’s city of New York as opposed to some estate in Kenya? Definitely Yes.

  1. Indoctrination

Other beliefs are indoctrinated into us. To a certain degree, a lot of people (apart from the truly enlightened) accept commonly held beliefs. As we grow up, our subconscious collects, accepts and stores a set of beliefs without questioning them.

  1. Identity beliefs

Some beliefs are as a result of whom we believe ourselves to be. “I am technical trader” is an example of an identity belief.

Are Your Beliefs About the Forex Market Useful?

“We trade our beliefs about the market”~ Van K. Tharp

There are a lot of different approaches to the market as there are traders. This is because every trader has a different beliefs about the market.

In a nutshell, we all see what we want to see.

The good news is that we get to choose our own beliefs. No one can impose a belief on us. And this is where the real power of beliefs about the FX market is realized.

We also get to decide whether the belief is useful to our trading. We can safely disregard and discard the beliefs that are not helping our trades. For instance, I believe that when the %K and %D lines of the slow stochastics cross below the 20-level mark, it becomes a signal to go long on my favorite currency pairs.

Although I know that the two stochastics lines do not have any influence on the forex market, I still choose to believe them. Right now, it serves me to hold on to this belief. If a day comes when this belief no longer holds true, I will easily abandon it.

Here is the thing. If your current beliefs about the forex market do not serve your best interests, you need to let go.

What are the beliefs of top forex traders?

If you take one thing out of this article, let it be this: You can take beliefs on and off. You should take off the beliefs that are contributing NEGATIVELY to your career and put on the beliefs that will help you become the next successful forex trader in Kenya.

During my few years of trading the forex market, I have interacted, studied and analyzed the beliefs of many successful traders. Most of them tend to have a set of similar trade beliefs:

  1. They take full responsibility of their actions in the market
  2. They understand that position sizing is the key to scoring their FX trade goals
  • Although they might be wrong more times than they are right, they still make money on the forex market
  1. They take trading seriously. Their investment in the forex market is a business, not a hobby.
  2. They realize that losses are part of the business, and they are ready to face their losses, pick themselves up and look for the next trading signal
  3. They diligently record their results.
  • They are comfortable with taking carefully calculated risks
  • They understand the importance of risk-reward ratios
  1. They believe that they can make profits in the forex market
  2. They have full confidence in their forex trading strategies.

Do any of these beliefs compare to the ones that you already have? If none of them does, it is probably the high time that you started reevaluating your forex trading beliefs.

How to reorganize your beliefs about online forex trading

Have you ever observed that you can have conflicting beliefs at the same time? This is because you are a mixture of conflicting parts.

Inside you, there could be any of the following parts:

  • A trader part
  • A rebellious part
  • A caring parent part
  • A gambler part, and
  • A fun part, just to mention a few

Each of these parts form who you are. Each one of them can have a great impact on how you approach online forex trading. For instance, the fun part may dictate that you open a position in the market out of boredom, whilst the trader part warns you that you should wait until you see a clear entry signal.

Fortunately, the process of reorganizing your beliefs is a simple one.

Firstly, you need to realize that you want to acquire a certain belief. For instance, if you believe that position sizing is a significant part of your forex trading strategy (and if you were not calculating position size before), then you can learn about position sizing and apply it on the next trade you place.

If there is no negative charge impeding the adoption of the belief, and if you continue to consistently take action, you will easily acquire this new belief.

However, if there is a negative emotional charge that is impeding the adoption of this new belief, such as the gambler part tempting you to take exceedingly bigger positions in the market, then it will be difficult for you to acquire this belief.

Van K. Tharp in his book, Trading Beyond the Matrix, gives 2 suggestions that you should try:

i.             Feelings Release:

The feelings release process involves completely changing the way we react to negative feelings and thoughts.

Instead of continuing to resist them, you embrace them fully. This serves to dissipate the power that that feeling has over you. After some time, the feeling fizzles out.

ii.           Parts integration:

Parts integration involves letting the different parts of yourself negotiate and make mutual decisions. For instance, the fun part of you may enter into discussion with the trader part of you. The fun part decides to give way to the trader part in exchange for the trader part stepping aside for the fun part during the weekend.

This may sound weird, but trust me, the moment I tried it with one of my nasty beliefs, I experienced transformational effect in my career.

iii.          Create a Self-Improvement Routine for your trading beliefs

Becoming a successful forex trader requires constant and consistent refinements.

The best athletes work on their mental part of performance as much as they work on their physical training and physique.

The same applies to successful forex traders. They work on their psychology as much as they work on refining their trading techniques.

As beliefs are a central part of your forex trading psychology, you should considering having a beliefs self-improvement routine.

Your beliefs improvement routine can include:

  1. Listing your current beliefs about forex trading in paper and pen
  2. Listing your current beliefs about your forex trading strategy

A powerful beliefs system will help to shape your trades for the better.

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Online forex trading is something that you can do and make a lot of money. However, before you start banking the big money, you need to learn how to trade the forex market.

In this article, I want to steal you into one of the secrets about learning online forex trading in Kenya. I’ve had the privilege to train many beginner, intermediate and advanced forex traders in Kenya. In all of them I have realized one thing. Many think that their greatest hindrance to making profits in the forex market is because they have not learned a certain technique.

Nothing could be further from the truth.

Learning online forex trading has more to do with how you handle and deal with yourself. While it is true that there are a few technicalities you need to muster before you can begin to trade profitably, the biggest challenge is learning how to control yourself.

Fighting your perceptions

The first thing that beginner forex traders need to overcome is the perception that currency trading is a get-rich-quick kind-of-a-thing.

I don’t blame you if you are looking to venture into FX as a shortcut to immense riches. This perception is created by many websites that tout forex trading as a way to make money fast and get rich quickly. In real sense, these websites do not have your best interests at heart. They want to take advantage of your newbie vulnerability to steal money from you!

Forex trading is not a shortcut to infinite wealth. Don’t venture into it if you want to make a quick killing and retire within your first year of trading. You will be thoroughly frustrated.

It is important that you approach internet forex trading with the right attitude.

Getting Your Feet Wet

Once you have dispelled all the myths that tout FX trading as a get rich quick, it is time to get your feet wet. When you are learning to swim, you don’t dive into the water head first. You first get your feet wet, test the depth of the water, and slowly waddle towards the deep end. Anything short of that is a recipe for an untimely death by drowning.

The same thing applies to online currency exchange trade. Here is a list of things that you need to do as you prepare to venture into forex trading:

  • Start reading

The first step to venturing into forex is getting an education. There are a few ways you can use to learn online forex trading, but whichever you choose, make sure that you are learning. You will need to learn the terms and lingo used in the currency exchange market as well as the strategies used to trade.

If you cannot manage to learn forex on your own, you may consider hiring enrolling for online forex trading classes in your town. Having a mentor to hold your hand simplifies the learning process and is faster than trying to learn everything on your own.

  • Research online forex brokers

All retail forex traders trade the forex market through forex brokers. However, not all brokers are born equal. Some are nothing but scams that will disappear with your profits after you’ve been pouring out your heart and soul on trades.

Some brokers require high starting capitals while others allow you to start trading with a small deposit. You will need to spend some time reading forex broker reviews and visiting their websites to understand how they operate.

Some of the things that you should keep in mind when researching forex brokers include:

  1. Check whether the broker is registered with the requisite authorities in their country of jurisdiction. This is a crucial step that will help you differentiate  real serious brokers versus those who are out to get you.
  2. What is the minimum deposit allowed by the broker? Is it an amount that you can easily raise without investing money that you cannot afford to lose? If you have less than $2000 to invest, you should probably seek those brokers who will allow you to trade in micro lots.
  3. Ease of deposits and withdrawals: You do not want to be stuck with a broker that can’t let you withdraw your profits easily. Which deposit and withdrawal channels does the broker offer? Are you comfortable with at least one of them. Keep in mind that many brokers will only let you withdraw your profits into the same account you used to fund the account.

If you have ease of mind with your broker, you will manage to allocate more time to analysis and fine-tuning your strategy. Doing your due diligence before settling on a broker goes a long way and can greatly enhance your chances of becoming the next successful Kenyan forex trader.

  • Open a demo trading account

After you have read many forex broker reviews and settled on a few that look promising, you will need to open a demo account to test how trading on their platforms looks like.

Many legitimate forex brokers (such as Easy Forex) will let you open a free demo account to pilot test their trading interface. They will even load the account with virtual money.

The free demo accounts allow you to learn more about the forex market and to practice trading with zero risk.

  • Test out some strategies

So far so good. Up to this point you should have some solid information about FX trading and a demo account. It is not time to put what you’ve been learning into practice. After you learned how to operate the demo account, it is time to test out some strategies.

I am assuming that you took step 1 very seriously and learned all that there is to learn in online forex trading. Which strategy did you think is the best to trade forex? Test it now.

I suggest that you spend a lot of time practicing trading strategies on the demo account. Devote time to your demo trades daily, and do not upgrade to a live account until you are making profits on the demo account. I repeat. Do not risk your ‘real’ money if you have not started making consistent profits on a demo account.

  • Open a live account

The final learning step is to open a live trading account. You will need a scanned copy of your original national ID card and a bank statement or utility bill.

Start by depositing a small amount into your real account and trade small lots. Better still, follow this link to get free $25.00 that you can use to start trading on your live account.

If you have gone up to this step without despairing, give yourself a pat on the back. To sum up what you’ve learned today, go slow when you are new to online forex trading. Take your time before you open a live account. Find a mentor to hold your hand. Practice on a demo account until you are sure of yourself, and once you open a live account, trade small.

Till next time. I am still yours trully. Patrick Mahinge.

Online forex trading is a lucrative venture with a very low entry barrier. You only need to learn how to trade forex and you are on your way to making some good retirement money.

If you have heard about online FX trade (aka online currency exchange) and decided it is a venture you would like to pursue, you will need to spend some time (and money?) learning how the forex market operates. Before we go any further, let me say that I am a big advocate for learning online forex trading. With the high rate of unemployment in Kenya and salaries that never grow proportionally to your needs, you’ve every reason to want to invest in online currency trading.

The second thing that I’d like to mention is that nothing beats experience. If you want to learn how to trade forex, your best bet will be to start trading. When you are a beginner, you should open a demo account on Easy Forex. The demo account allows you to practice trading with virtual currency. You do not put any of your money at risk. And conversely, you do not take any profits to the bank. But you will gain a lot of experience from trading forex on the Easy Forex demo account.

The downside of trading on a demo account, however, is that you do not experience how it feels to have your hard earned money on the line. I’d therefore recommend that you open a micro-account, deposit a few hundred shillings in it and use it to learn how to trade. It is by far the best way to learn how to trade forex.

In today’s article, I am going to show you a few ways that you can use to study forex and become a pro in it in less than 4 weeks.

Free Online Courses and Forex Tutorials

The internet is a mine of information. Seriously. There is so much information online and all you need is to know how to use Google. Some good places to find free online forex courses and tutorials include:

  • Individual forex broker’s websites
  • BabyPips.com
  • Investopedia.com

Although there is all the information you need about FX trading in websites and blogs, you need to be wary of websites where you are getting your information. Some may contain outdated information while a majority publish information just for the sake of publishing.

Another downside with using online forex tutorials is that you may suffer from information overload. Every forex trader develops his or her own forex trading system. The information you get online is therefore very subjective.

To adequately utilize the information you get in online forex trade tutorials, you will need to sieve much of the information and only retain the one that you are going to use.

YouTube Videos and Tutorials

Don’t underestimate the power of YouTube when it comes to learning online forex. There are many informative video tutorials on YouTube. If you are keen, you will learn how to trade online forex in no time and be on your way to investing in this lucrative trade.

The best way to use YouTube Video tutorials is when you already have a demo account. This will allow you to practice what you learn.

If you have not registered for a demo account, click here to register and download the MT4 trading software from Easy Forex.

However, just like with the many forex training courses and tutorials that you will find on free blogs and websites, some YouTube videos can be misleading. Internet marketers will post crappy videos as they seek to make money from advertisements placed on their YouTube channels. You will therefore need to approach the training videos selectively.

Hiring a Forex Trainer or Mentor

If you have a few thousand shillings to spare, hiring a forex trainer or mentor is one of the best ways to learn the ins and outs of the forex market. A lot of forex traders who offer trading classes in Kenya will charge you an average of 50,000/= for a few days of training.

The best thing with hiring a trainer is that they give you concise and concrete information that you can put to use immediately and recoup your investment.