The typical path that a new trader follows

The new trader's path

You've been studying the markets for a few years, you've read tons of books, taken a few trading courses and even attended a seminar, your demo trading results looked pretty good, and then you went live and lost almost half of your account funds in just three weeks. You then decided to go back to the drawing board to find another trading strategy, because you figured it was your trading system's fault that you lost all that money so quickly - all you need is to just find the "perfect" trading strategy.

Does this remind you of something? For many traders, this story is all too familiar. Most new traders who approach the markets end up blowing through their entire trading account, and lots of them even do it multiple times! Trading can almost seem rigged at times, because it seems so easy and effortless when you're trading on a demo account or when you're not in the market and just watching. But, the minute you switch to a real trading account, it looks like the whole game is changing and someone is changing the rules to keep you from making money. I've already felt this before too, and each trader goes through the very same trials and tribulations. Some give up, others never change and continue to lose money without trying to make any real adjustments to their trading habits, and some make it to the other side, becoming profitable on a constant basis.

In today's article, we're going to discuss how you can become a profitable trader and how you can stop blowing through your trading account.

There are different steps one goes through when learning how to trade. They consist of roughly the same elements and traders tend to progress through these stages in a similar order. Some progress quickly through each stage while others remain stuck in a stage for months or even a year. Let's take a look at the 6 steps that a trader goes through on his path to becoming a profitable forex trader.

Step 1:

Problem - You heard about forex trading from a family member, a friend, a colleague or possibly an internet banner. It seems like a legitimate and exciting way to make money. You have pounds (or euros, or dollars!) in your eyes and dreams in your head. You can't wait to learn all about trading, open an account and watch the money pile up.

Solution - While there is nothing wrong with being excited and interested in trading, you should be cautiously optimistic at this point rather than planning to put all of your eggs in one basket while dreaming of a new lifestyle. Trading is anything but a way to get rich quickly; it takes discipline, dedication, organisation, logic and patience - if you think it's a way to make money easily, you better think again. If you want to build a long-term forex trading career, you have to be realistic and understand right now that developing good trading habits will determine whether or not you succeed.

Step 2:

Problem - You start to research the internet, there are many different trading strategies, trading platforms, training courses and seminars. You decide to learn the basics of forex by signing up for a free course for beginners. After that, everything makes sense to you, you are excited by the opportunity that forex trading seems to offer and now you just have to decide which trading strategy you're going to use. After some research and thought, you finally decide on a trading method that will help you successfully trade the foreign exchange market. The problem with this step is that many traders start by learning a trading strategy that is far too complicated. They have Elliot waves, MACD lines, stochastic indicators and other indicators all over their charts. These things aren't conducive to the development of a relaxed and confident state of mind.

Solution - Instead of learning with a bunch of different indicators or buying expensive trading software, you should start by learning to read the charts to find support/resistance lines and identify price action patterns. Start by using basic charts without any technical indicators, you can then refine your analysis with an indicator to find points of confluence between your analysis and a technical indicator.

Step 3:

Problem - The first two steps are fairly similar for most traders, but stage 3 is where their paths often diverge. At this point, most people are trying to learn a trading strategy, they have bought a trading robot or they are trying to use a bunch of different indicators. Most tend to use a demo account for very little, if at all, the first time they learn to trade. It's human nature to want to jump into the markets as soon as possible and start taking risks.

So, in step 3, most traders have spent some time learning a trading method and then, after seeing one or two examples of this method working, they open a live account and start trading with real money. In general, they make stupid trading mistakes like entering the wrong lot size or buying when they want to sell, etc. These errors are the result of a lack of rigour and not taking the time to familiarise oneself with the trading platform and its features. In step 3, traders usually either bankrupt their first trading account, or lose so much that they stop trading for a while, at least until they learn another trading system.

Solution - Many traders seem to think they don't need to learn how to trade on a demo account, or they don't do it long enough. You need at least one or two months on a demo account to master a strategy, if you don't, you're foolish! Remember, this is your hard-earned money you're risking, waiting one or two months to start trading won't hurt you, especially if you consider that it will allow you to become more familiar and more confident in your trading method, which will ultimately allow you to trade much more effectively.

Most of the time, traders blow through their first trading account because they're too excited and too anxious; they have a poor understanding of their trading method, and let's be honest, they really just want to get into the markets because it sounds like fun at first. Well, I can assure you that blowing through the funds that took you a few months to earn won't take you that long, and the thrill you feel when you start trading live will end very quickly once you realise that you have no idea what you're doing and that the market is taking your money like a hungry white shark. So make sure that you master your trading strategy with a demo account for at least one or two months before you even think about risking your money in the markets.

Step 4:

Problem - At this stage, most traders are looking for a "better" trading strategy. There are so many strategies on the internet these days that it can be almost impossible to not be tempted to buy one of those "too good to be true" systems...and there are many of them. This is the stage where traders are really trying to find the "holy grail" and they end up spending money on trading systems or other products that they think will help them correct their previous mistakes.

Solution - This solution is quite simple; if it sounds too good to be probably is. The forex industry is filled with trading systems, strategies, courses and books that make trading look easy. The truth is that trading is not easy, it's a battle against your own emotions that only you can overcome. Yes, the strategy you use is important, but it's not true that more expensive or more complicated and fancy trading systems work better than trading strategies that are simple to understand and implement along with good risk management.

Step 5:

Problem - This is the stage where traders feel they have found the "perfect" strategy and are "finally" ready to start making money in the markets. Typically, at this stage, a trader has developed either good or bad trading habits, and it's also the first stage where some traders have a real chance of making money on a regular basis. However, what happens to most of them is that they are not properly prepared with a trading plan, a trading journal, and a concrete trading routine. Instead, they are excited about their new system and they start trading without any sort of structure or organised plan. This typically leads to over-trading with excessive risk taking and heavy financial losses.

Solution - Don't ignore this step, many traders have a trading plan and journal, and they know what they're looking for in the markets. But, after losing a few trades, they seem to forget their plan and start improvising. It's really easy to stop being disciplined and lose control. In fact, it's much easier to trade "wildly" than staying disciplined and patient and developing good trading habits. The trick is that the longer you stay disciplined, organised and patient, the easier it will be for you to do it, and ultimately you will enjoy trading in the right way because you have forged these things into positive habits. You have to stick it out long enough and endure some "pain" to see the long-term benefits.

Step 6:

Problem - At this stage, you are either on the right track because you remain disciplined, organised and patient, or you blew through your account in step 5 because you were overly excited and emotional. After emptying 1 or 2 accounts, you really start to feel depressed about your trading, you think it's impossible to trade successfully. You fall into a downward spiral of losing money because you feel like you have lost so much that you no longer care about losing, so you start taking more risks and trading more frequently, in other words, now you're gambling on the forex.

Solution - It's time to get some rest. Stop trading real money, and maybe even stop demo trading and forget about the markets for 1 or 2 weeks. They will be there when you return. The best remedy for ending an emotional trading period is to simply pull yourself out of the markets for a while. If you feel that you have reached this stage, and that you really need help, then I just suggest that you stop trading for a while. You will come back later after some training on a demo account.


I hope today's article has helped open your eyes to the fact that you aren't the only trader who made emotional mistakes or blew through 1 or 2 trading accounts. It happens to everyone. Either you realise that what you were doing previously doesn't work and you try to fix it in a logical manner as we discussed here today, or you simply continue to "play" like you did before, possibly leading to the end of your trading career.