Some people will describe their forex trading activities as a hobby or interest. However, people who are successful forex traders never trade as if it were a hobby, irrespective of what they might tell other people, or perhaps even believe themselves.

A hobby or interest is something that you can pick up or put down any time you like, whereas trading forex is nothing like that at all.

It is a business that you can run on a part-time or a full-time basis, but that does not change the fact that you have to approach your trading activities in a businesslike and professional manner.

If you genuinely approach forex as a hobby, then you are going to check the charts every so often. More than likely it will be when the urge to do so takes you. There will be no discipline in your activities, and you will not be in a position where you are looking out for particular situations to develop in the market as an indication that there might be an opportunity for a profitable trade.

Consequently, 90% of the profitable trade opportunities will pass you by, while you are likely to put money into the market when the idea appeals to you. In other words, your trading activities are driven by emotions and interest levels rather than by a system.

You cannot run a successful forex trading business in this way.

You must have a business plan, a plan that is disciplined and objective driven. Not only must you have a set of rules that dictate when you will trade and when you will not, you must also have rules that govern how you run your business on a daily basis.

There is an old saying that might be something of a cliché, but one that is nevertheless true that ‘if you fail to plan, you plan to fail’.

This is completely true of your forex trading activities, so if you have never created a business plan before, now is a good time to start learning how to do so! Because without a trading business plan you are being realistic on how you want to trade.

Much as the image might have a great deal of appeal, you do not meet many successful forex traders who are loose cannons, mavericks who trade on gut instinct, hunches and intuition.

On the contrary, most successful traders are calculating and ruthless, people who work to a very well established pattern and system which allows them no room for emotions or hunches to get in the way.

This is absolutely critical factor for a forex beginner to understand. When you trade forex, you must do so by following a forex trading system and it is essential that you teach yourself to cut emotions out of the trading picture completely.

It is essential that you learn everything about the forex trading system you are going to use. You need to understand why it is so critically important to your forex trading. However, even at this point, the essential thing to understand is that you cannot allow your emotions to dictate how you trade.

There are several characteristics that you would commonly associate with successful forex traders. Most successful traders have a high degree of self discipline and an ability to detach themselves from what is happening in the markets so that they can analyze the action in a manner that enables them to trade only when it is logical and sensible to do so.

A large number of forex beginners tend to treat trading something like a lottery, viewing the potential to make profits or suffer losses from trading forex as something that depends on good luck or fortune.

While an experienced trader will sit on the sidelines if they do not see a valid trading opportunity developing, a forex beginner will dive in because they want to start making money from their trading activities as quickly as possible.

In effect, they allow their heart to rule their head, and that is a pretty surefire recipe for financial disaster!

There is no luck involved, and you do not make consistent, long-term profits from forex trading on hunches.

You need a forex trading system, because without the system you have no structure to your trading activities and you must treat your trading as a business not a hobby.

As far as forex trading is concerned, you make your trading decisions based on a trading system, and of course, this system itself must be based on something. Generally, trading systems are based on forex market analysis, of which there are two types – known as fundamental and technical analysis.

A fundamental analyst would be someone who watches world events and day-to-day occurrences that can affect the performance of forex markets. They would for example look out for major financial news, political events that could cause instability in particular currencies or even major disasters (both natural and man-made) which can throw markets sideways.

As examples, forex markets across the world were thrown into turmoil by the events of 9/11, and even something as unconnected to finance as the earthquake and tsunami that hit Japan this year (2011). This type of incident made the forex market jitter.

While following world events that inevitably affect forex markets is a valid and extremely valuable way of analyzing what markets are likely to do, for the small private trader, conducting proper fundamental analysis that would produce accurate market predictions is almost impossible.

After all, it is simply not feasible to keep your eye on everything that is happening in every country 24 hours a day, so the danger of trying to be a fundamental analyst for an individual trading their own account is that they are likely to miss many of the most important events. Hence, although fundamental analysis is still used, it is generally only used by pan-global banking corporations and multibillion dollar conglomerates.

The alternative to forex fundamental analysis is a forex technical analysis, which is based on using charts to plot what is likely to happen in the future based on what has happened in the past.

This works because chart patterns have a history of repeating themselves and while it can never be true that what happened in the past is always going to exactly happen the same in the future, similar chart patterns do tend to be repeated on a fairly regular basis. On the other hand, it is the fact that they are not repeated every time that makes it inevitable that you will have to suffer trades that do not go in your favor, as all forex trading systems work on the basis that the charts indicate a pattern that is likely to be repeated.

Technical analysts believe that all fundamental events that effect forex markets are already built into the information that is presented in chart form, with very few events coming along that had never been seen before. Of course, this is not 100% accurate either as proved by the events of 9/11, but as a general rule, there is a good degree of truth in this, hence the propensity of chart patterns to be repeated.

The vast majority of private forex traders use technical analysis as the basic bedrock of their forex trading system. They take a chart for a particular currency pairing and plot various indicators on that chart through which they can see buying and selling signals.

Trading forex online is an extremely democratic process but it is best approached first via a forex demo account. It is something that anyone can learn and can make good money with as long as they learn to trade properly. With some online brokers willing to accept an initial deposit from as little as $25, online forex is something that almost anyone can afford to become involved with.

Apart from learning what the forex industry is all about, the other thing that you will need to do is find yourself an online forex broker. This is not at all difficult, as there are dozens of such companies operating online.

In many countries, the financial services regulations forbid non-qualified people to give specific advice, and it is therefore not possible to recommend any one particular broker above any other in a book like this. However, all you need to do is run standard Google search for ‘online forex brokers’, as this will turn up plenty of information:

When you access any broker’s website, you will get a clear picture from the home page of exactly what kind of service they offer.

Very commonly, they will include an online trading software program that allows you to practice with your trading system, and many brokers will also offer you a forex demo account, where they will give you a notional deposit of fictitious money to allow you to trade, as a way of honing your skills.

Sometimes however, using a forex demo account is not a good thing, because while it is fun and can be informative to practice using such an account, it can create a very false sense of knowledge and ability. It is therefore critically important to understand that trading with a forex demo account bears little resemblance to doing the same with the real thing.

This is a very common mistake made by forex beginners who, because they have a degree of success practicing with their demo account suddenly realize that they have ‘a gift’ that miraculously enables them to ‘do this forex thing’.

Consequently, they put together their initial trading deposit, open a live account with the broker of their choice, and dive straight into ‘real’ trading.

And guess what?

All of a sudden, instead of making the gains that they were making when they were trading their forex demo account, they are now making losses when trading live. Moreover, with every loss, they can see their initial margin disappearing under pressure that is mounting at a corresponding speed.

Trading a forex demo account is completely different from trading using your own real money.

With a demo account, there is no real money involved and even if there were, it is not yours. Hence, there is absolutely no pressure on you to be successful, and indeed, some online forex brokers actually exacerbate this problem by allowing you to reset your demo account back to the starting point every time you make a loss.

Consequently, there is no pressure to perform when you are trading a training account.

However, as soon as you trade with your own money, the pressure to perform is on, and you should not underestimate how tough this pressure can be. It is pressure that forces mistakes, and it is mistakes that will lose you money.

Forex demo accounts and the real thing are like chalk and cheese, so just because you become a ‘demo wizard’ does not actually mean anything at all as far as future profitability is concerned.

As a forex beginner you must have a trading system. This will allow you to trade in a professional manner and will ensure that your forex trading is consistent and free from risk.

Equally important, it must be a trading system that is both practicable and workable, something that is simple enough to make sense but not too simple that you can learn nothing from it.

Most forex beginners try to come up with a whizz-bang new forex trading system that is sensational and guaranteed to come up with a winner every time. They do this by making the system that they then try to work with way too complex on the basis that the more complicated their system is, the more effective it must be (according to their logic).

It doesn’t work that way, and an overly complex forex trading system will confuse you, give you the wrong information at the wrong times and thereby lead to lots of mistakes.

Forex trading mistakes can get to be very expensive, so make sure that you have a system and work with it, but keep it simple enough to make sense and therefore money!

You must stick to the system you have decided to use and do not deviate from it in any way. Why over complicate something if it is being successful for you. You will only create more problems for yourself in the long term. Keep your forex trading as simple as possible and you will succeed. But always make sure you practice trading in a forex demo account before you begin to trade live.