Updated from its original posting on 2011-10-07
In learning how to trade, I think most, if not all, forex traders would agree that you need to involve yourself in various educational processes.
For example, you have to dedicate time to reading about technical trading theories so you have a solid foundation on how prices react to support and resistance levels. Another popular way to learn forex is through online schools like our very own School of Pipsology. Mentors are great as well, as you have someone to guide you in your trading journey.
One thing you should remember though is that the effect of each educational process on the learning curve is different. One person might absorb a lot from reading a book, but another might learn best from having a mentor. This means that you MUST find out which educational process you should prioritize.
That being said, it is important for you to NARROW YOUR FOCUS. In other words, focus on the education processes that are most effective for you. The fact is, learning how to trade is subjective and personal, so it only makes sense that the way each trader learns may vary as well.
This may sound easy but because the amount of knowledge out there is so vast, it becomes very hard for aspiring traders to pick which methods are the most effective for them. The Internet makes this doubly difficult since it’s just so easy to overload on information.
To find out what you need to focus on, ask yourself this simple question: “What or who should I listen to?”
Before reading further, think about your answer to that question for a minute.
Done? Do you have an answer now?
If you answered “George Soros,” you’re wrong. If you answered “Warren Buffet,” then you’re still wrong! Even though they are superstar investors, the way they trade may not be something that fits your personality.
Now, if you answered “Me,” then give yourself a pat on the back!
If you have been keeping up with my blog, you would know that journaling your learning process is something I heavily advocate. By looking at your journal, you can gain an insight into how you think, which can help you cherry pick and focus on the learning processes that shorten the learning curve the most.
To illustrate, I’ll share with you the story of my friend named Tim (not his real name of course) who has been trading for two years but has NEVER been profitable. In fact, he’s only a breakeven trader.
It’s not that he didn’t invest any time or capital on his forex education. On the contrary, he even has a mentor who guides him through the trading process. But he wasn’t happy with the results he was getting since he couldn’t seem to make any consistent profits. With that, I advised him to review his trading journal thoroughly to figure out what he needs to change.
As he browsed through his trading journal, he noticed that most of his trades were simply based on what his mentor told him to do. The rest of his other trades were taken because that’s what he thought his mentor would do. He found it hard to believe at first, but he soon realized that he was merely mirroring his mentor’s thought process and wasn’t really thinking for himself.
Because he was unsatisfied with the lack of progress, he decided to stop availing of his mentor’s services. He also thought it would be better for him to stop trading first and start immersing himself in theory by reading forex trading books instead.