Trading is a skill that takes time to learn. Think of it like boxing – it’s also a skill that takes time to learn.
If you get into a professional boxing ring without any training, you will be physically beaten! If you get into the forex ring without any training, you will get beaten financially!
The similarities are that both examples are Skills and both require psychological preparation. The difference is that one is physical and the other is financial.
We can usually deal with a physical beating in a matter of days or weeks, BUT a financial beating can be devastating and easily affect us for the rest of our lives, not only hurting our hip pocket, but can cause problems with our relationships and family. So when we step into the forex ring we need to be prepared.
When a professional boxer enters the ring, he has already been practicing in a safe environment, usually for years, this safe environment is where he can make mistakes without needing medical attention. He can also pair up with other opponents who have more skill and experience than he does, and learn from them. He also has someone watching him and providing advice and guidance.
Then, when he is ready, he gets in the ring and boxes for real, he has accepted the risk and KNOWS he can get hurt, but he has also studied his opponent and done his homework, so he KNOWS he has a good chance. He may still lose this round, but if he wins most of it, he will take home the money.
BUT! What about the psychological side? Is he afraid to enter the ring? Sometimes!!! But he is aware of it and can control how it affects him in a positive way. Will he think about the money he will make? Or will he think about the fight as it is going on and plan his next moves during the breaks? He will analyze the results of previous rounds and make changes in his strategy for the next round.
Can you predict what will happen next? If so, it means that you have learned to analyze what you read and make a projection into the future. (A very valuable skill for a FOREX trader.) A Forex trader, like a professional boxer, will not enter the Forex ring without prior preparation. He may not spend years practicing in a demo account, but he will at least spend a month or two or three sparring with the Forex market in a safe environment where he won’t be beaten.
He’ll practice Forex trading with and learn from other traders, and he’ll have someone watching him and giving advice and guidance.
Then, when he’s ready, he’ll enter the Forex ring and trade Forex for real, he’s accepted the risk and KNOWS he can get hurt, but he’s also studied the Forex market and done his homework, so he KNOWS he has a good chance. He can still lose on this trade, but if he wins most of his trades, he will take his money home.
BUT! What about the psychological side? Is he afraid of entering the Forex Trading ring? Sometimes!!! But he is aware of this fear, but he can control how it affects him, in a way that is beneficial to his Forex trading. Will he think about the money he will make? Or will he think about the things that affect the market as he goes along and plan his next trades in anticipation of the results? He will analyze the results of his previous trades and make changes to his strategy, or continue with the one that is working and plan his next Forex trades.
So it’s easy to see that trading in a Forex demo account is something everyone should do before getting into a real Forex account.
A demo account will give the trader most of the skills needed to trade profitably, giving him a training ring for sparring.
BUT A BIG WARNING!!!
Like a boxer, a Forex trader has learned to manage his emotions, which is often overlooked by new Forex traders. BUT, this is probably what separates the successful traders from the ones who keep getting beaten!
If you’re thinking about getting into Forex, be sure to practice first and find all you can about controlling your emotions.
Fear, greed, impatience are the main culprits of financial whiplash, so keep an eye on them and learn to overcome them before you enter the ring with them.
Understanding these emotions will allow you to use them to your advantage in understanding the market, the market is influenced by these emotions and if you understand them, you can have them on your side, which gives you an advantage.