Over my last 20 years of trading, I’ve been approached by countless people asking me for advice on becoming a Forex trader. More often than not, they’re starry-eyed and seduced by the romance, freedom and financial independence associated with Forex trading. But fast-forward six months, and their story turns out different from their dreams and an all too familiar one. The enthusiasm is gone, only to be replaced by frustration. Big dreams fade into harsh reality.
So, what happened?
First, they failed to realise that there are no shortcuts to successful trading. In fact, contrary to popular belief, Forex trading isn’t a get-rich-quick scheme. Far from it! It’s more like a career. And as with any career, it requires a lot of time, discipline, and commitment to attain competence. In other words, you need to do your homework on a daily basis. No exceptions.
As a Forex trader, doing my homework boils largely down to technical and fundamental analysis. The weightage of technical and fundamental analysis varies. In Forex, it’s between 60% to 70% technical, and between 30% to 40% fundamental, but the weightage is different when it comes to stocks, shares, options and other forms of trading.
Having a good set of computers is a must, as it enables me to do my fundamental and technical analysis properly. The technical side involves charting and analysing diagrams, volumes, Ichimoku charts, moving averages, pivot points, resistance and fault lines, and seeing everything from a bird’s-eye and worm’s-eye view. The bird’s-eye view refers to the yearly, monthly, weekly, daily and four-hourly charts; while the worm’s-eye view covers the hourly, 15-minute, five-minute and one-minute charts. After analysing all of this data, I need to correlate it to the fundamentals. I pay close attention to the world news, updates from the central banks, and the latest economic reports pertaining to the Euro and US dollar (as I only deal with this currency pair). I keep a pulse on currency forecasts, the US dollar index and what the banks and financial analysts are thinking regarding the Euro and US dollar, whether it’s bearish or bullish. I also look at other people’s technical analysis (even though I do my own), market opinions and trading plans.
Checking tables and charts daily and being constantly on top of current events isn’t easy. But anything worth doing never is. I believe making a commitment to learning how to trade profitably, honing those skills, continually improving and testing plans is the best way to grow as a Forex trader.
To put things in perspective, step into any major global leading investment firm and you’ll find some of the best and brightest graduates from top universities in the world devoting much time and effort to researching and studying the market. This is who you are up against.
Knowledge is not only power but a tool that needs to be constantly sharpened. Knowledge about market behaviours, underlying factors that may be driving its movement, and the best course of action will leave you in a much stronger position to deal with the bulls and bears of the world.
When you have a lot to juggle, you need a battle plan. And that means doing your homework.
Authored by Kenneth Kam
Produced by Callio Media