I have said this before and I hope people listen. Trading is not a get rich quick scheme. You will be better served opening a 401k or buying shares to hold than trading thinking that you are going to make a million this year. I had those hopes but discovered to keep my sanity; I trade to buy time to do other things that I like not to be a millionaire.

The first time I ever traded was opening up a stock trading account with Scotstrade to buy shares. My very first trade was based on those so called penny stocks where I was advised by my trading guru to buy Sirius radio. Ok I did that. I bought it for $1.20. I was going to be a millionaire soon. The stock then went to $2.0 and I was very happy .However I realized that I was still in the red (broker fees and the charting package etc). So I closed my account since I was not a millionaire in 2 months. Of course now Sirius is at 3 dollars and my 1000 shares would have made me happy. In the course of these 5 yrs I decided somewhere along the way to trade forex as it’s an easy market .Isn’t it? I mean you have heard of fx made easy, haven’t you?

Forex trading was not any easier. It took me two years to realize that I was not trading but just gambling. If you are depressed when you make a losing trade, you are gambling. If you are straying from your trading strategy, you are gambling. If you don’t know how many contracts you should be trading, you are gambling. If you are not paying your bills so you can have an oanda account, you are gambling. If you are using the gas money to trade as you closed your savings account, you need a therapist! To know if you are gambling or trading, you might ask yourself these questions.

1. Do you have a trading plan?

Having a trading plan is the basic start point for any trader. If you open up a business, you do need a business plan. So what makes most traders think that they are immune from this? We have discussed the basics of a trading plan and our forex forum is now open to discuss this and new ideas. However, there is no way that you can make money in forex without a trading plan.

Making a trading plan is time consuming and damn difficult. Since you might want immediate gratification, you might decide to trade without one. The result of this is failure. You will be one of the nay sayers on the net who say you can’t make it in forex. Isn’t it amazing how those that fail are the loudest. Make a forex trading plan and the go to the next step.

2. Do you have a money management plan?

There is no way you are going to be a forex trader without a forex money management plan. It amazes me to go to all forex forums and forex blogs and all that people talk about is the latest forex system. Why is it that Apple can plan for the day that they shall have fewer sales and you don’t? You need to plan for those days where you lose money and those that you make money. To me when I learnt about money management, my trading became more fun. I was not worried about losing money, I was not excited about making money. I just traded.

There is a simple forex lot calculator we have but we have noticed that most people are just downloading our forex system but less than 2% are downloading the forex lot calculator. You may quote me. I can make money with the worst forex trading system on this earth, and lose money with the best forex system .The difference will be money management. If you have ever found yourself in a situation where you can not pay this week’s bills but next weeks’ pay check will cover the bill, you are not good in money management and you might lose your house for that. Forex is no different.

3. Are you disciplined?

This is an easy question. If you are the kind of person who shuts off your alarm clock so you can get 5 more minutes of sleep, you should not be trading. For those in the USA, if you can’t wake up at 2am, because last night you had to get a budweiser, you should not be trading.

But seriously, if you can not follow a simple trading plan and stick with it, you should not be trading. A simple way to know if you are disciplined is to take a a moving average crossover trade (let’s say 5/13 ema crossover trade). Trade it for one week on your trading account .I mean your trading account not a demo account. If you stray from it, for even one second, then you are not disciplined and you need to work on that before you start saying “the trading system is not working”. That one experiment will save you more money than you will ever imagine.

Once you know you are not disciplined, there is nothing wrong with reading books about mental fortitude and trader psychology, because believe me ,when you will start trading 10 lots, you will need it.

4. Do you review your trades?

It’s great you made 100 pips today, but did you ever ask yourself why? Was it a fluke, or did you actually follow your trading plan? When was the last time you reviewed your trading strategy? Does gold follow the same path as the dollar anymore or since the arab countries are accepting the euro more, has that changed?

Just like McDonalds, has a new menu at least twice a year after reviewing their strategy, so should you. Excitement about the forex trading Holy Grail has made many a broke trader. There is no holy grail, just hard work that evolves with the times. I find it funny that very few traders are willing to get new information after they discovered the latest, brightest, best forex system. Do yourself a favor and go to moneytec, you will find the best forex system every month for the last 5 years.

If you cannot understand that times change and microwaves were invented because there were more unmarried men that ever before, you are a gambler not a trader.

There is a big difference between a gambler and a trader. A trader is a businessman at heart and knows he needs to work. Most forex traders are gamblers that is why the lose rate is at 90%. Now where are you?

Filed under: Forex Trading • How To Trade Forex

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