I started trading Forex in 2009. I had previously spent a year learning to trade pre-race odds on Betfair, but kept seeing people mention using ideas from forex trading to trade betfair, and so finally decided to check out this Forex for myself.

I never returned to trading Betfair - Forex hooked me completely.

I started with a local broker, an MT4 download, a $200 account, and no idea of what I was doing.

I progressed through the usual things - downloaded indicators, systems and books (most unread), and of course the internet forums. I then spent 2 to 3 hours per night trading after work, and the weekends were for reading and "learning" from the forums.

Of course, I made all the usual mistakes, and kept making them over and over, in slightly different forms for year after year. Trickling away cash at what finally amounted to a serious amount of wealth when added up. The goal was the same as everyone that starts this path - to trade for a living, and so not be tied to a "job".

I made several attempts to trade for a living on annual holidays, but each time I would crash and burn, admittedly lasting a bit longer each time. Finally a decision was made to actually make this work, and stop "playing". I was getting older, and jobs were getting hard to find, and the original idea of the location freedom that trading gave made it the best option for my future. I had invested many thousands of hours into trading, and surely I could use that investment to better myself - I just had to learn how to trade consistently and profitably.

I decided to do what all traders should do, and that was to create a working plan for my forex business. This time I decided to really do it. Not just parrot other's ideas, but create a plan for myself that would encompass what I had learnt over the years, and what I should do when trading. What follows is that plan, and how I arrived at it.

The first thing to decide is are you a trader or an investor? These are my definitions -

INVESTOR

Takes long term, low risk positions in the market looking for a return of 10 to 12% per year. Takes few trades, and holds for days to months. Bases trades of fundamentals and daily charts. Trends and moving averages are a big part of trading.

TRADER

Takes short term, high risk trades with the expectation of quick profits. Aims for at least 10% per week, preferably more. Turns over trades quickly, very rarely holding a trade overnight. Trades from very short term charts, without much regard for fundamentals. Generally trades what is termed Price Action.

This division is more important to understand than first appears. Why? Well investors have plenty of time while they wait for trades, so they are very likely to post, and be very vocal, on forums. The ideas and systems they post will always be targeted at long term trading, even if they don't explicitly say so. Their comments will usually be to denigrate short term traders, and so by reading the forums without understanding this, you gain a very one-sided view of how to trade as a trader.

You also need to decide for yourself what sort of a trader you want to be. Trying to be both just does not work well. For me it is a short term trader. I trade off small time frame charts. I only have open trades while I am in front of the screen, and I expect to make a decent return each day, and certainly each week.

I find setting a daily and weekly profit goal is good for my trading.

First it motivates me to accomplish the goal, and second, it gives me a point to stop and walk away. The later is very important. I've found that when I have a good run, and quickly exceed my target amount, I often tend to take reckless trades and promptly loose it all again. My policy now is to stop trading for a while once my goal is achieved. Take an hour off and just watch TV or something non-trading to let my mind settle and regain the trading mood.

I currently set my goal at 2% gain per day/session, giving a weekly gain of 10%.

This also sets my stop-trading-for-the-day-point at -2%. If I'm down 2%, then its time to switch off the computers and do something different.

The 2% is not just random. I find that I can usually make 1% on capital within a hour of starting, so the 2% represents the amount I can usually make in a 2 hour session. As I get better, I am open to increasing the percentage, but still keeping the trading session at no more than two hours. After that time I find my concentration drifting way too much to successfully trade, in fact one and a half hours is probably the ideal session time for me.

I've spent years trading multiple items. My favorites being Aussie, Gold, Oil, and GPYJPY. One thing I have noticed is that when I try to trade intensively, then I can't focus on more than one item. If I try to trade two, then both suffer. So now I just trade the Aussie - AUDUSD. By trading just one instrument, you get to know its little quirks, and rather than look to something else when it goes quiet, I now just stop trading. I attribute this policy of just trading one instrument to increasing my winning days by at least 50%.

In an ideal world, I would trade the Tokyo, Europe and New York opens for up to two hours. 6 hours per day - no more. My brain just can't focus sufficiently for longer.

You have all seen the story that to hide something, the best place to hide it is in plain sight. Well the Holy Grail of trading is hidden just about everywhere trading is mentioned, but few give it much regard. It has taken me 6 years and many thousands of dollars to find it for myself, and I'll now give it to you for free, knowing that, like me, you won't realise the gifts' value until you find it again for yourself.

The grail comes in two parts, and both are incredibly difficult to master. The first part is without doubt the hardest thing you will ever do in your life - period. It goes against millenia of inherited coding in your brain, but you must focus all your willpower to achieve it if you want to succeed as a real trader. The second part is not quite so hard, and I would rate it as the second most difficult thing you will do in your life. (I'm still working on it.) I can guarantee that your battle with this will be long and hard. No one can help you but yourself, but remember that the rewards are the Promised Golden Kingdom, and that does not come easily.

Cut your losses short. Let your profits run.

I know you just turned off, but before you go, I am very serious in saying this is the true Holy Grail of trading. It took a lot of my life and wealth to truly discover it, even though it was pushed in my face every day. Don't disregard this truth like, I did, when searching for the secret of trading.

The subject of the market being random or not is discussed constantly but rather than discussing it, we need to use it, and to use it we need to make some assumptions. If the market is non random, then indicators and systems would work 100%, and we would all be very rich. If the market was random, then indicators would work about half the time and we would all be struggling to break even. Put like that it is obvious - the market is basically random. I'm not saying it is purely random, but from the point of view of a lone trader without knowledge of the market manipulators moves, it appears close to random.

What does a random market mean? Well it means we can't accurately predict where price will be in the future. It means we just have to trade what we see at the moment, rather than assuming the market will move to a certain point at a certain time. It means that our indicators are not really much use. And it means that we have to be very strict in applying the Holy Grail to our trades. If we do these things, and just watch what happens to price, then we will be OK.

I was a hedger for six years. I am no longer. Why? It is just too much work to go through for a tiny gain. It is much, much better to apply the Holy Grail, and just take the loss when they are small, and live free to trade again.

One very subtle, negative impact of hedging is the way it programs your mind against the Holy Grail. It conditions you to accept and hold onto every trade - right or wrong. It marries your mind to a trade that was originally only going to last a few minutes, to keeping it close for days, if not months. I no longer love my trades so much. I can cut them free with one click and move on to another. That freedom is power. Power to earn. Power to grow. Power to succeed.

Here is where I differ from the 2% brigade. You will see it everywhere 2% blah, blah, blah. I am a trader. My account capital is what I have to work with to make money. Unused capital is wasted capital, and so I use 50% of my capital as margin. If I have $2000 in my account, then I can trade one lot of AUDUSD (margin $1000),leaving $1000 for safety. My risk - the amount before my stop, will usually be between 5 and 10%, however My finger is on the mouse to kill any trade before that. If there is a white-swan event (I'm in Australia, and we have black swans already), or I don't set a stop, margin call will only wipe out half my capital.

I know it is much more than recommended, but by who - Investors??

Here is where knowing what you are trading for matters. I trade for daily gains. I need to use my capital a fully as possible to make my profit. I need to risk more to make more, but I also need to tightly control that risk as per the Holy Grail. Plus, and most important, I never leave the screen when I have a trade open.

As a note here, my progress in Forex was greatly slowed by trading with too small a lot size. I spent years with .01 lots, and it helped me keep too many bad habits for too long. The losses were not painful enough to make me change. In fact I became very casual with these small trades and their losses. Only later, when I added up how much I had lost on small trades, did the full impact of it hit. If you trade with a "painful" lot size, you will be careful and you will follow your plan, and you will learn much, much quicker.

Well I have looked back over my trading to date, and catagorised all my losses. I found five "reasons", although often more than one applied to the trade. Here is my list. Greatest losses first.

Letting losers run/No stops

Nothing more to say. Solution - Apply the Holy Grail, and hit that "close" button.

Holding trades when not at screen

I am no good at long term trading. Some of my greatest losses involved overnight trades. I just seem to get it wrong more often than right. Solution is to never hold a trade unless I am actively watching it on the screen.

Hedging

Not so much the actual hedging, but the point when annoyance at too much capital being tied up in hedges with a weeks or months time-frame to exit at a small profit that you just hit the "close all" button, take the loss and start again. Solution is to never hedge.

Outside stress influence

Quite a big one for me, and hard to do much about, other than to try to keep calm and relaxed, and try to ignore all outside distractions. If the situation becomes too bad, it is better to just shut down the computer and not trade at all. Some of my biggest single losses have been from this, so, for me, it is a serious issue to be managed.

Platform/Operator mistakes

Sometimes, particularly when tired, I hit the wrong button, or close the wrong trade. It happens! Long term answer is to never trade tired. Occasionally I've had a system crash/outage that has caused some loss, but I now have a second computer ready, and mobile apps on the phone to exit trades should trouble happen.

Removing the causes of loosing trades is a huge way towards profitability. Just one small loss takes at least a couple of good trades to recover, and a big loss can take weeks..

I stayed with MT4 and bucketshops for years. Finally I wanted to try LMAX, and found Fastbrokers with their Pathfinder Trader platform. Wow!!!

All that is said about the faults of MT4 for serious trading is pretty right. It is OK for what is is designed for, and it is a great amateur platform. It does work well, and their is so much information for it, but when you get serious, you need more. Having a real Depth Of Market display and being able to trade directly on it is just amazing for a scalper.

I attribute the move to a serious platform as a big step in becoming consistent as a trader. Having the right tools for the task makes it easier.

I still use MT4 and also C Trader, particularly for longer term market views and swing trades during the session, but Pathfinder Trader is my real love. The one disadvantage for me is the huge amount of data Pathfinder uses. At least ten times the rate of my fastest MT4. This is because it accesses every tick, not just an average, and every DOM change. If I leave it on all day it uses more than my wireless internet data allowance. That will be OK when I get a fixed landline in the future, but for now, I just use it for a couple of hours per day.

I've just had a bad two weeks trading, but there is light at the end of the tunnel.

Started with problems with Pathfinder Trader. There had been a week of upgrades to "transform" the program. The main thing I saw was to remove access to history charts, meaning the only chart I can use is the one starting from when I connect the program! Every time I make a change on the chart, it restarts again. I can just about live with this, but every now and then the program would put half a dozen false orders on the screen when I click for a new order, with them all looking "real" - leading to total confusion.

While I had one of these confusing screens, I also had a computer crash. It was just too much, so I left it off and went to bed, confident the order I had open would be closed during the night - Wrong. Woke up to see my account halved. Just closed everthing and resolved not to do it again......

Next week, struggling to get the balance back up, and taking many risks, it happen again. Computer really crashed - Windows 8 strikes again - Left two trades open overnight. Took a couple of days to get them out in profit. Never again. This was the last time I leave a trade unattended - For sure.

The computer in question - A MSI Hi spec gaming notebook - While a great computer, has been a continual source of intermittent issues, mainly stemming from Windows 8. This notebook can't be loaded with Windows 7, and right now it is effectively "bricked". Down to trading on my small Zen-Book ASUS.

There was a bright side though - I had a phone call from a salesman for a bucket-shop. He was quite nice, but persistent. While talking to him I had the real thought that I actually know more than I think I know about forex trading. Sometimes it takes a moment of insight like this to realise just how far along the path you are.

I have been investigating trading Futures, with the expectation of opening an account next year. I had been going to trade through Pathfinder Trader, but with the issues I've recently had, I started looking elsewhere. Found AMP Futures that offer a $500 min account, while everyone else wants $2500 to start. What the heck - I started the account opening procedure. Took a week, but I finally had a "real" trading account and data feed, not just a CFD account. Was able to fund it with more than the minimum, but bank charges were not cheap (AU$32 + US$50)

Started with Multicharts.NET as a platform. Actually took a few days to get it working. All simple when you know, but having to wait a day for returned emails (Due to time differences) slowed things a lot.

What a difference compared to spot Forex. All the symbols and expiry's. The different margins and trading hours. There is a lot to learn.

I started with the Aussie dollar mini - M6A - at $US100 margin/contract for a trade opened and closed in the same day. Data feed is US$15 per month and fees come to USD$4.05 per contract round turn. It's not the best way to trade futures with the high transaction costs, but it is also harder to loose a lot while learning

It's been much harder than I expected - Getting out of this loosing rut. Been tempted to trade bigger than I should and take trades I should not take, just to try to get some good positive results. Of course the opposite is usually the case. Also been trading new instruments as well, and thus spreading myself far too thin.

Made the decision to buckle down and just trade how I should. Only trading one instrument, and instead of trying to anticipate the market, I just try to follow its moves. Taking many small trades. It's not so impressive as a few big wins, but those small amounts slowly mount up. It has been really hard shaking those loosing blues. Starting to get my confidence back, and confidence is very important to successful trading.

The Futures side has been interesting. Made a pile of mistakes, but learnt from them. The learning process is always faster when money is on the line. With the higher costs of trading the micro futures, I need to adopt a longer time frame to my trades. I had a good night scalping M6B (GBP), but when the costs were totaled in, it only gave $5 profit. The broker did quite well though. So its actually not a bad thing to use two different methods, splitting my trading between spot forex scalping and futures swing trades.

For a couple of years I have been reading posts from a great trader - "Mighty One" on kreslik.com forums. For all that time, his posts have been just indecipherable, but two weeks ago it just clicked, and I got an idea of what he had been talking about all this time. As he had said, it seems very simple when you see it. I have yet to implement his method in practice, but when I've done it for real, I'll post details and results here. His method is with longer term trades, and stacking entries at strategic price points so that the max loss can be no more than 2%, while the upside is nearly unlimited.

Most pairs move around 100 pips per day, so why aren't we all rolling in the loot? . The basic idea is to wait for the daily high (or low), then start trading away from that peak. First with a small lot, then once that is in profit enough to cover another lot, add that. Keep adding lots using only the profit gained from past lots. Keep moving your stop loss to keep the total risk to 2% or less of your account, while using profits to place more lots. Keep going while the trend goes. Finally close out everything and retire.

There has been a GREAT thread on Forex factory about order flow trading by Forextraderx. Filled with great gems of insight, and should not be missed if you are interested in trading sentiment.