Trading is a game of patience and discipline. If you are not a patient person or if you are not disciplined, you might as well forget becoming a successful trader. Now if you are serious about becoming a forex trader, then you need to make a trading plan. This trading plan is like a blueprint or a roadmap that you will need to follow daily in order to achieve your financial goals. So the first thing that you need to do is develop your trading plan.
Starting Small
Now one misconception that many new traders have is that you need to have something like $5K to $10K in your account as equity if you want to make a full time income as a forex trader. Many gurus are also going to advice that you need to start with at least $5K-$10K in your account. This is the advice that we got when we started. But this is not true. You don’t need to start with a large capital in order to succeed in forex trading. Our advice to you, start with only $250. Yes, you don’t need more than $250 to turn that into $ 1 million in 12 months. Of course, you need to be skilled as a trader otherwise you won’t be able to do anything with this small amount. So what is more important: Capital or Skill? In our opinion skill is more important. Many new traders skip this step. To tell you the truth, it can take you from 6 months to 12 months to develop that skill to become a successful trader. Some traders might take longer than this. There are no shortcuts. You need experience to tackle different market conditions which can only be obtained with the passage of time. So don’t rush! You will make it if you are patient and disciplined.
Now let’s do some maths and see how we can turn $250 into $1 million in 12 months. Suppose we have developed a trading system that makes a gain of 100% per month. With this assumption, if your trading system makes 100% ROI per month you will be doubling the account equity each month. Let’s see:
Start: $250
1st Month: $500
2nd Month: $1,000
3rd Month: $2,000
4th Month: $4,000
5h Month: $8,000
6th Month: $16,000
7th Month: $32,000
8th Month: $64,000
9th Month: $128,000
10th Month: $256,000
11th Month: $512,000
12th Month: $1,024,000
As you can see if you can make 100% return consistently for 12 months, you can turn $250 into $1 million in 12 months. In the first 3-5 months, your account did not grow much but after that you can see exponential growth in your account at the end of every month. The advantage of starting small is that you are not risking too much of your hard earned cash. So if you are not good at trading, the most that you can lose is $250. After losing $100, our advice go back to the demo account again and practice more. Only come back to live trading when you think you have the right skill. On the other hand once you have developed the right skills you will be doubling this small amount every month and by the end of 12 months, you can achieve your goal of making your first million dollar.
Now this was the easy part. Goal setting was easy. You said you want to make a million dollar. You wanted to start small. You decided to start with only $250. You did the maths with the assumption that you will be making 100% return every month. The maths showed that in 12 steps you can achieve your goal of $1 million. But can you really achieve your goal of making 100% return per month? Easier said than done! Many pro traders are content with making 30-50% return per month. On the other hand, there are traders who can make more than 100% return per month. Can you do it? Well, it all depends on your trading strategy and your trading system.
Selecting The Right Trading Strategy
Now you have set your financial goal. You want to make $1 million. You need to make 100% return per month. By the way, it is not necessary to make 100% return every month. You can make 50% return per month. If you make 50% return per month, you will reach your goal in 24 months instead of 12 months. So whatever you make, make sure you can make it comfortably. What’s the point in making 100% return every month if you are forced to sit infront of your computer screen for 10-15 hours daily. Can you sit for 10-15 hours daily infront of the computer monitor? We can’t and we don’t want to. So whatever trading strategy you are going to select should be easy to trade and should not take more than 1-2 hours daily to trade. Avoid selecting those strategies that require hours of trading daily. The best strategy for you will be swing trading. Trading on higher timeframes like H1 and H4 does not take much time and it can make many pips if you know how to read the charts on these timeframes.
Don’t rush! Take your time. Choose a strategy. Test it on the demo account for a few weeks. If you find success with it and if you find it easy to trade continue trading with it otherwise drop that strategy and pick another one. Now we are working in the realm of the practical. Strategy selection can be a time consuming process. It can take you months before you find the right strategy for you. This is a realistic assessment. We took months to find the right strategy that started working for us. Once you have the right strategy, practice it. The more you will practice it, the better you will become with it. So with a few months of practice your skill level will increase. Now you need to change that strategy into a system. You can read this post where we explain a simple swing trading strategy that works best on H1 and H4 timeframe and can make 300-400 pips per week.
Developing Your Trading System
Once you have selected the strategy that you think will give you the results that you want, you need to convert that strategy into a system. A trading system is a set of rules that tells you when you are going to trade and when you are not going to trade. Your trading system in essence gives you the rules that you will follow daily to enter and exit the market. Developing a trading system will start once you have identified the right trading strategy for yourself. Many new traders waste thousands of dollars on buying expensive software and systems in search for the holy grail. There is no holy grail. Trading is a game of probability. You will win some trades and you are going to lose some trades. If you can develop a trading system that wins 7 trades out of 10 on average, you are on the right track. Rest is the game of risk and money management. With a 70% winrate, you need to finalize your money management rules. All these things will have to be addressed at the system development stage. As said before, you don’t need to rush. Take your time. The simpler your trading system, the higher the chances of it working. Complicated systems don’t work. Simple things work well in life. This applies to trading as well. One mentoring service that you should try is the Forex Mentor PRO. Dean Saunders and Marc Walton are two professional traders. Their trading system is very simple. Developing your trading system can take some more months. Don’t let that deter you. In the end, it is your system that is going to take you to your financial goals. So be very careful in developing your system. Try to make it very low risk.
Now it is not necessary to have a system with a very high win rate. Richard Dennis had started with only $370 as a small time futures and commodity trader. He ended up making more than $250 million. He had a simple trend following system. He taught that system to his students whom he used to call the Turtles. His system became famous as the Turtle Trading System. It is estimated that Turtles made $100+ million with this system even though many had no prior experience of trading.
You will be surprised to know that the Turtle Trading System had a winrate of only 40% yet it made many millionaires. How did it do that? Simple. Turtle Trading System was designed to catch big moves in the market with low risk. Months would pass before a signal would be generated. So it became essential to keep an eye on many markets so that you have enough signals generated by the system. As said above it won only 4 out of 10 trades but the winners would be so big so as to wipe out all the losses. You might correlate this thing with the reward/risk ratio. So your system should have a high reward/risk ratio something like 3:1 if you really want to make money trading with it.
As said above, trading with the Turtle Trading System required you to keep an eye on many markets. In the same manner, you need to keep an eye on many currency pairs instead of just sticking with just 1 or 2 pairs. This is what we do. We also take help from a few signal services. This way we know what is happening to the different pairs. We can’t monitor all the pairs. It is time consuming. By using a good signals service, we shorten the time required for analysis. If the other team is saying that USD/JPY is starting a new trend. We analyze the chart using our own trading system. If we are satisfied, we enter into a trade otherwise we skip it. This is a good forex signals service that we have tried. It’s signals are good. Most of the time you will win with these signals. But as said above, once you get a signal, use your trading system to analyze that pair and make your own judgment whether you need to enter into a trade or not. Once you have developed your trading plan, you are all set to start your journey that will take you to your first million. You can also read this story where a 20 years old student from Vermont USA was able to beat thousands of professional traders in one of the most grueling online forex competitions. After reading the story you can also take a detailed look at his trading system and discover how simple it is. So keep your trading simple as much as possible if you want to win in the longer run!
Starting Small
Now one misconception that many new traders have is that you need to have something like $5K to $10K in your account as equity if you want to make a full time income as a forex trader. Many gurus are also going to advice that you need to start with at least $5K-$10K in your account. This is the advice that we got when we started. But this is not true. You don’t need to start with a large capital in order to succeed in forex trading. Our advice to you, start with only $250. Yes, you don’t need more than $250 to turn that into $ 1 million in 12 months. Of course, you need to be skilled as a trader otherwise you won’t be able to do anything with this small amount. So what is more important: Capital or Skill? In our opinion skill is more important. Many new traders skip this step. To tell you the truth, it can take you from 6 months to 12 months to develop that skill to become a successful trader. Some traders might take longer than this. There are no shortcuts. You need experience to tackle different market conditions which can only be obtained with the passage of time. So don’t rush! You will make it if you are patient and disciplined.
Now let’s do some maths and see how we can turn $250 into $1 million in 12 months. Suppose we have developed a trading system that makes a gain of 100% per month. With this assumption, if your trading system makes 100% ROI per month you will be doubling the account equity each month. Let’s see:
Start: $250
1st Month: $500
2nd Month: $1,000
3rd Month: $2,000
4th Month: $4,000
5h Month: $8,000
6th Month: $16,000
7th Month: $32,000
8th Month: $64,000
9th Month: $128,000
10th Month: $256,000
11th Month: $512,000
12th Month: $1,024,000
As you can see if you can make 100% return consistently for 12 months, you can turn $250 into $1 million in 12 months. In the first 3-5 months, your account did not grow much but after that you can see exponential growth in your account at the end of every month. The advantage of starting small is that you are not risking too much of your hard earned cash. So if you are not good at trading, the most that you can lose is $250. After losing $100, our advice go back to the demo account again and practice more. Only come back to live trading when you think you have the right skill. On the other hand once you have developed the right skills you will be doubling this small amount every month and by the end of 12 months, you can achieve your goal of making your first million dollar.
Now this was the easy part. Goal setting was easy. You said you want to make a million dollar. You wanted to start small. You decided to start with only $250. You did the maths with the assumption that you will be making 100% return every month. The maths showed that in 12 steps you can achieve your goal of $1 million. But can you really achieve your goal of making 100% return per month? Easier said than done! Many pro traders are content with making 30-50% return per month. On the other hand, there are traders who can make more than 100% return per month. Can you do it? Well, it all depends on your trading strategy and your trading system.
Selecting The Right Trading Strategy
Now you have set your financial goal. You want to make $1 million. You need to make 100% return per month. By the way, it is not necessary to make 100% return every month. You can make 50% return per month. If you make 50% return per month, you will reach your goal in 24 months instead of 12 months. So whatever you make, make sure you can make it comfortably. What’s the point in making 100% return every month if you are forced to sit infront of your computer screen for 10-15 hours daily. Can you sit for 10-15 hours daily infront of the computer monitor? We can’t and we don’t want to. So whatever trading strategy you are going to select should be easy to trade and should not take more than 1-2 hours daily to trade. Avoid selecting those strategies that require hours of trading daily. The best strategy for you will be swing trading. Trading on higher timeframes like H1 and H4 does not take much time and it can make many pips if you know how to read the charts on these timeframes.
Don’t rush! Take your time. Choose a strategy. Test it on the demo account for a few weeks. If you find success with it and if you find it easy to trade continue trading with it otherwise drop that strategy and pick another one. Now we are working in the realm of the practical. Strategy selection can be a time consuming process. It can take you months before you find the right strategy for you. This is a realistic assessment. We took months to find the right strategy that started working for us. Once you have the right strategy, practice it. The more you will practice it, the better you will become with it. So with a few months of practice your skill level will increase. Now you need to change that strategy into a system. You can read this post where we explain a simple swing trading strategy that works best on H1 and H4 timeframe and can make 300-400 pips per week.
Developing Your Trading System
Once you have selected the strategy that you think will give you the results that you want, you need to convert that strategy into a system. A trading system is a set of rules that tells you when you are going to trade and when you are not going to trade. Your trading system in essence gives you the rules that you will follow daily to enter and exit the market. Developing a trading system will start once you have identified the right trading strategy for yourself. Many new traders waste thousands of dollars on buying expensive software and systems in search for the holy grail. There is no holy grail. Trading is a game of probability. You will win some trades and you are going to lose some trades. If you can develop a trading system that wins 7 trades out of 10 on average, you are on the right track. Rest is the game of risk and money management. With a 70% winrate, you need to finalize your money management rules. All these things will have to be addressed at the system development stage. As said before, you don’t need to rush. Take your time. The simpler your trading system, the higher the chances of it working. Complicated systems don’t work. Simple things work well in life. This applies to trading as well. One mentoring service that you should try is the Forex Mentor PRO. Dean Saunders and Marc Walton are two professional traders. Their trading system is very simple. Developing your trading system can take some more months. Don’t let that deter you. In the end, it is your system that is going to take you to your financial goals. So be very careful in developing your system. Try to make it very low risk.
Now it is not necessary to have a system with a very high win rate. Richard Dennis had started with only $370 as a small time futures and commodity trader. He ended up making more than $250 million. He had a simple trend following system. He taught that system to his students whom he used to call the Turtles. His system became famous as the Turtle Trading System. It is estimated that Turtles made $100+ million with this system even though many had no prior experience of trading.
You will be surprised to know that the Turtle Trading System had a winrate of only 40% yet it made many millionaires. How did it do that? Simple. Turtle Trading System was designed to catch big moves in the market with low risk. Months would pass before a signal would be generated. So it became essential to keep an eye on many markets so that you have enough signals generated by the system. As said above it won only 4 out of 10 trades but the winners would be so big so as to wipe out all the losses. You might correlate this thing with the reward/risk ratio. So your system should have a high reward/risk ratio something like 3:1 if you really want to make money trading with it.
As said above, trading with the Turtle Trading System required you to keep an eye on many markets. In the same manner, you need to keep an eye on many currency pairs instead of just sticking with just 1 or 2 pairs. This is what we do. We also take help from a few signal services. This way we know what is happening to the different pairs. We can’t monitor all the pairs. It is time consuming. By using a good signals service, we shorten the time required for analysis. If the other team is saying that USD/JPY is starting a new trend. We analyze the chart using our own trading system. If we are satisfied, we enter into a trade otherwise we skip it. This is a good forex signals service that we have tried. It’s signals are good. Most of the time you will win with these signals. But as said above, once you get a signal, use your trading system to analyze that pair and make your own judgment whether you need to enter into a trade or not. Once you have developed your trading plan, you are all set to start your journey that will take you to your first million. You can also read this story where a 20 years old student from Vermont USA was able to beat thousands of professional traders in one of the most grueling online forex competitions. After reading the story you can also take a detailed look at his trading system and discover how simple it is. So keep your trading simple as much as possible if you want to win in the longer run!
